Exhibit 10.1


 


LOAN
AND SECURITY AGREEMENT


 


THIS LOAN AND SECURITY AGREEMENT
(this “Agreement”) dated as of August 5,
2008 (the “Effective Date”) among (a) SILICON VALLEY BANK, a California corporation with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at One Newton Executive Park, Suite 200,
2221 Washington Street, Newton, Massachusetts 02462 (“Bank”), and (b) ENERNOC, INC., a Delaware corporation (“EnerNOC”), and ENERNOC
SECURITIES CORPORATION, a Massachusetts corporation (“EnerNOC Securities”) (hereinafter, EnerNOC and EnerNOC
Securities are jointly and severally, individually and collectively, referred
to as “Borrower”), provides the terms on which
Bank shall lend to Borrower and Borrower shall repay Bank.  The parties agree as follows:


 


1              ACCOUNTING
AND OTHER TERMS; AGENTED LOAN ARRANGEMENT.


 


1.1          Accounting terms not defined in this Agreement shall be
construed following GAAP.  Calculations
and determinations must be made following GAAP. 
Notwithstanding
the foregoing, all financial covenant calculations shall be computed with respect to
the Borrower only, and not on a consolidated basis.  Capitalized terms not otherwise
defined in this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein.


 


1.2          Agented
Loan Arrangement.


 


(a)           Designation
of Agent.  Each Borrower hereby
designates EnerNOC as the agent (the “Agent”) of each Borrower to discharge the
duties and responsibilities of the Agent as provided herein.


 


(b)           Operation of Loan Arrangement.


 


(i)            Except as otherwise permitted by
Bank, Credit Extensions hereunder shall be requested solely by the Agent as
agent for each Borrower.


 


(ii)           Any Credit Extension which may be
made by Bank under this Agreement and which is directed to the Agent is
received by the Agent in trust for that Borrower who is intended to receive such
Credit Extension.  The Agent shall
distribute the proceeds of any such Credit Extension solely to that
Borrower.  Each Borrower shall be
directly indebted to Bank for each Credit Extension distributed to any Borrower
by the Agent, together with all accrued interest thereon, as if that amount had
been advanced directly by Bank to a Borrower (whether or not the subject Credit
Extension was based upon the accounts and/or inventory or other assets of the
Borrower which actually received such distribution), in addition to which each
Borrower shall be liable to Bank for all Obligations under this Agreement,
whether or not the proceeds of the Credit Extension are distributed to any
particular Borrower.


 


(iii)          Bank shall have no responsibility to
inquire as to the distribution of Credit Extensions made by Bank through the
Agent as described herein.


 


(c)           Credit Extensions Directly to
Borrower.


 


(i)            If, for any reason, and at any time
during the term of this Agreement:


 


(A)          any Borrower, including the Agent, as
agent for each Borrower, shall be unable to, or prohibited from carrying out
the terms and conditions of this Agreement (as determined by Bank in Bank’s
sole and absolute discretion); or


 


(B)           Bank
deems it inexpedient (in Bank’s sole and absolute discretion) to continue
making Credit Extensions to or for the account of any particular Borrower, or
to channel such Credit Extensions through the Agent, then Bank may make Credit
Extensions directly to such Borrower as Bank determines to be expedient, which
Credit Extensions may be made without regard to the procedures otherwise
included in this Section 1.


 


(ii)           In the event that Bank determines to
forgo the procedures included herein pursuant to which Credit Extension are to
be channeled through the Agent, then Bank may


 

















 


designate one or more Borrower to fulfill the
financial and other reporting requirements otherwise imposed herein upon the
Agent.


 


(iii)          Each Borrower shall remain liable to
Bank for the payment and performance of all Obligations (which payment and
performance shall continue to be secured by all Collateral) notwithstanding any
determination by Bank to cease making Credit Extensions to or for the benefit
of any Borrower.


 


(d)           Continuation
of Authority of Agent.  The
authority of the Agent to request Credit Extensions on behalf of, and to bind,
each Borrower, shall continue unless and until Bank acts as provided in Section 1.2(c) above,
or Bank actually receives:


 


(i)            written notice of: (i) the
termination of such authority, and (ii) the subsequent appointment of a
successor Agent, which notice is executed by the respective Presidents of each
Borrower then eligible for borrowing under this Agreement; and


 


(ii)           written notice from the successor
Agent (i) accepting such appointment; (ii) acknowledging that the
removal and appointment has been effected by the respective Presidents of each
Borrower eligible for borrowing under the within Agreement; and (iii) acknowledging
that from and after the date of appointment, the newly appointed Agent shall be
bound by the terms hereof, and that as used herein, the term “Agent” shall mean
and include the newly appointed Agent.


 


(e)           Indemnification.  The Agent and each Borrower respectively
shall indemnify, defend, and save and hold Bank harmless from and against any
liabilities, claims, demands, expenses, or losses made against or suffered by
Bank on account of, or arising out of, this Agreement, Bank’s reliance upon
Credit Extension requests made by the Agent, or any other action taken by Bank
hereunder or under any of Bank’s various agreements with the Agent and/or any
Borrower and/or any other Person arising under this Agreement, except for
liabilities, claims, demands, expenses, or losses directly resulting from Bank’s
gross negligence or willful misconduct.


 


2              LOAN
AND TERMS OF PAYMENT


 


2.1          Promise
to Pay.  Borrower
hereby unconditionally promises to pay Bank the outstanding principal amount of
all Credit Extensions and accrued and unpaid interest thereon as and when due
in accordance with this Agreement.


 


2.1.1       Revolving
Advances.


 


(a)           Availability.  Subject to the terms and conditions of this
Agreement, Bank shall make Advances not exceeding the Availability Amount.  Amounts borrowed under the Revolving Line may
be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject
to the applicable terms and conditions precedent herein.


 


(b)           Termination;
Repayment.  The Revolving Line
terminates on the Revolving Line Maturity Date, when the principal amount of
all Advances, the unpaid interest thereon, and all other Obligations relating
to the Revolving Line shall be immediately due and payable.


 


2.1.2       Letters
of Credit Sublimit.


 


(a)           As
part of the Revolving Line, Bank shall issue or have issued Letters of Credit
for Borrower’s account.  Such aggregate
amounts utilized hereunder shall at all times reduce the amount otherwise
available for Advances under the Revolving Line.  The face amount of outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve) may not exceed Thirty-Five Million Dollars ($35,000,000.00),
inclusive of Credit Extensions relating to Sections 2.1.1, 2.1.3, 2.1.4 and
2.1.5.  If, on the Revolving Line
Maturity Date, there are any outstanding Letters of Credit, then on such date
Borrower shall provide to Bank cash collateral in an amount equal to 105% of
the face amount of all such Letters of Credit plus all interest, fees, and
costs due or to become due in connection therewith (as estimated by Bank in its
good faith business


 


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judgment), to
secure all of the Obligations relating to said Letters of Credit.  All Letters of Credit shall be in form and
substance acceptable to Bank in its sole discretion and shall be subject to the
terms and conditions of Bank’s standard Application and Letter of Credit
Agreement (the “Letter of Credit Application”).  Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.  Borrower
further agrees to be bound by the regulations and interpretations of the issuer
of any Letters of Credit guarantied by Bank and opened for Borrower’s account
or by Bank’s interpretations of any Letter of Credit issued by Bank for
Borrower’s account, and Borrower understands and agrees that Bank shall not be
liable for any error, negligence (other than gross negligence or willful
misconduct), or mistake, whether of omission or commission, in following
Borrower’s instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto.


 


(b)           The
obligation of Borrower to immediately reimburse Bank for drawings made under
Letters of Credit shall be absolute, unconditional, and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.


 


(c)           Borrower
may request that Bank issue a Letter of Credit payable in a Foreign
Currency.  If a demand for payment is
made under any such Letter of Credit, Bank shall treat such demand as an
Advance to Borrower of the equivalent of the amount thereof (plus fees and
charges in connection therewith such as wire, cable, SWIFT or similar charges)
in Dollars at the then-prevailing rate of exchange in San Francisco,
California, for sales of the Foreign Currency for transfer to the country
issuing such Foreign Currency.


 


(d)           To
guard against fluctuations in currency exchange rates, upon the issuance of any
Letter of Credit payable in a Foreign Currency, Bank shall create a reserve
(the “Letter of Credit Reserve”) under the
Revolving Line in an amount equal to ten percent (10%) of the face amount of
such Letter of Credit.  The amount of the
Letter of Credit Reserve may be adjusted by Bank from time to time upon notice
to Borrower to account for fluctuations in the exchange rate.  The availability of funds under the Revolving
Line shall be reduced by the amount of such Letter of Credit Reserve for as
long as such Letter of Credit remains outstanding.


 


2.1.3       Foreign Exchange Sublimit.  As part of the Revolving Line, Borrower may
enter into foreign exchange contracts with Bank under which Borrower commits to
purchase from or sell to Bank a specific amount of Foreign Currency (each, a “FX Forward Contract”) on a specified date
(the “Settlement Date”).  FX Forward Contracts shall have a Settlement
Date of at least one (1) FX Business Day after the contract date and shall
be subject to a reserve of ten percent (10%) of each outstanding FX Forward
Contract in a maximum aggregate amount equal to Three Million Five Hundred
Thousand Dollars ($3,500,000.00) (such maximum shall be the “FX Reserve”).  The aggregate amount of FX Forward Contracts
at any one time may not exceed ten (10) times the amount of the FX
Reserve.  The amount otherwise available
for Credit Extensions under the Revolving Line shall be reduced by an amount
equal to ten percent (10%) of each outstanding FX Forward Contract (the “FX Reduction Amount”), inclusive of Credit
Extensions made pursuant to Sections 2.1.1, 2.1.2, 2.1.4 and 2.1.5.  Any
amounts needed to fully reimburse Bank will be treated as Advances under the
Revolving Line and will accrue interest at the interest rate applicable to
Advances.


 


2.1.4       Cash Management Services Sublimit.  Borrower may use up to Thirty-Five Million
Dollars ($35,000,000.00), inclusive of Credit Extensions made pursuant to
Sections 2.1.1, 2.1.2, 2.1.3 and 2.1.5, of the Revolving Line for Bank’s cash
management services which may include merchant services, direct deposit of
payroll, business credit card, and check cashing services identified in Bank’s
various cash management services agreements (collectively, the “Cash Management Services”).  Any amounts Bank pays on behalf of Borrower
for any Cash Management Services will be treated as Advances under the
Revolving Line and will accrue interest at the interest rate applicable to
Advances.


 


2.1.5       Term
Advances.


 


(a)           Availability.  Subject to the terms and conditions of this
Agreement, Bank agrees to lend to Borrower, from time to time prior to the
Commitment Termination Date, term loan advances (each a “Term Advance” and collectively the “Term Advances”) in an aggregate amount not
to exceed the Term Loan Amount.  Each
Term Advance must be in an amount equal to or greater than Five Hundred
Thousand Dollars ($500,000.00).  When
repaid, the Term Advances may not be re-borrowed.  Bank’s obligation to lend hereunder shall
terminate on the earlier of (i) the occurrence and continuance of an Event
of Default, or (ii) the Commitment Termination Date.


 


(b)           Repayment.  Each Term Advance is payable in: (i) thirty-six
(36) consecutive equal monthly installments of principal, calculated by the
Bank, based upon (A) the amount of the Term Advance, and (B) an
amortization schedule equal to thirty-six (36) months, plus (ii) interest
on the outstanding principal amount of the


 


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Term Advance at the rate set forth in Section 2.4,
beginning on the first calendar day of the month following the Funding Date of
such Term Advance and continuing thereafter on the first calendar day of each
successive calendar month.  All unpaid
principal and accrued interest is due and payable in full on the applicable
Term Loan Maturity Date.  Payments
received after 1:00 p.m. Eastern time are considered received at the
opening of business on the next Business Day.


 


2.2          Overadvances.  If, at any time, the sum of (a) the
outstanding principal amount of any Advances (including any amounts used for
Cash Management Services), plus (b) the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve), plus (c) the FX Reduction Amount, plus (d) the
outstanding principal balance of the Term Advances, exceeds the Revolving Line,
Borrower shall immediately pay to Bank in cash such excess.


 


2.3          General
Provisions Relating to the Credit Extensions.  Each Credit Extension shall, at Borrower’s
option in accordance with the terms of this Agreement, be either in the form of
a Prime Rate Credit Extension or a LIBOR Credit Extension; provided that
in no event shall Borrower maintain at any time LIBOR Credit Extension having
more than two (2) different Interest Periods.  Borrower shall pay interest accrued on the
Credit Extensions at the rates and in the manner set forth in Section 2.4.


 


2.4          Payment
of Interest on the Credit Extensions.


 


(a)           Computation
of Interest.  Interest on the Credit
Extensions and all fees payable hereunder shall be computed on the basis of a
360-day year and the actual number of days elapsed in the period during which
such interest accrues.  In computing
interest on any Credit Extension, the date of the making of such Credit
Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on
the same day on which it is made, such day shall be included in computing
interest on such Credit Extension.


 


(b)           Credit
Extensions.  Each Credit Extension
shall bear interest on the outstanding principal amount thereof from the date
when made, continued or converted until paid in full at a rate per annum equal to the Prime Rate plus the Prime Rate Margin
or the LIBOR Rate plus the LIBOR Rate Margin, as the case may be.  On and after the expiration of any Interest
Period applicable to any LIBOR Credit Extension outstanding on the date of
occurrence of an Event of Default or acceleration of the Obligations, the
Effective Amount of such LIBOR Credit Extension shall, during the continuance
of such Event of Default or after acceleration, bear interest at a rate per
annum equal to the Prime Rate plus four percent (4.0%).  Pursuant to the terms hereof, interest on
each Credit Extension shall be paid in arrears on each Interest Payment
Date.  Interest shall also be paid on the
date of any prepayment of any Credit Extension pursuant to this Agreement for
the portion of any Credit Extension so prepaid and upon payment (including
prepayment) in full thereof.  All accrued
but unpaid interest on the Credit Extensions shall be due and payable on the
Maturity Date.


 


(c)           Default
Interest.  Except as otherwise
provided in Section 2.4(b), after an Event of Default, Obligations shall
bear interest four percent (4.0%) above the rate effective immediately before
the Event of Default (the “Default Rate”).  Payment or acceptance of the increased
interest provided in this Section 2.4(c) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Bank.


 


(d)           Prime
Rate Credit Extensions.  Each change
in the interest rate of the Prime Rate Credit Extensions based on changes in
the Prime Rate shall be effective on the effective date of such change and to
the extent of such change.  Bank shall
use its best efforts to give Borrower prompt notice of any such change in the
Prime Rate; provided, however, that any failure by
Bank to provide Borrower with notice hereunder shall not affect Bank’s right to
make changes in the interest rate of the Prime Rate Credit Extensions based on
changes in the Prime Rate.


 


(e)           LIBOR
Credit Extensions.  The interest rate
applicable to each LIBOR Credit Extension shall be determined in accordance
with Section 3.6(a) hereunder. 
Subject to Sections 3.6 and 3.7, such rate shall apply during the entire
Interest Period applicable to such LIBOR Credit Extension, and interest
calculated thereon shall be payable on the Interest Payment Date applicable to
such LIBOR Credit Extension.


 


(f)            Debit
of Accounts.  Bank may debit the
Designated Deposit Account for principal and interest payments or any other
amounts Borrower owes Bank hereunder when due. 
These debits shall not constitute a set-off.


 


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(g)           Payments.  Unless otherwise provided, interest is
payable monthly in arrears on the first calendar day of each month.  Payments of principal and/or interest
received after 1:00 p.m. Eastern time are considered received at the
opening of business on the next Business Day. 
When a payment is due on a day that is not a Business Day, the payment
is due the next Business Day and additional fees or interest, as applicable,
shall continue to accrue.


 


2.5          Fees.  Borrower shall pay to Bank:


 


(a)           Commitment
Fee.  A fully earned, non-refundable
commitment fee of Eighty-Two Thousand Five Hundred Dollars ($82,500.00) on the
Effective Date (Bank acknowledges receipt from Borrower of a good faith deposit
in the amount of Twenty-Five Thousand Dollars ($25,000.00));


 


(b)           Anniversary
Fee.  A fully earned, non-refundable
anniversary fee of Sixty Thousand Dollars ($60,000.00), which fee shall be
earned as of the date hereof, and shall be payable on the earlier to occur of (i) the
date that is one year from the Effective Date, or (ii) the early
termination of this Agreement;


 


(c)           Letter
of Credit Fee.  Bank’s customary fees
and expenses for the issuance or renewal of Letters of Credit, including,
without limitation, a Letter of Credit Fee of one and one-quarter of one
percent (1.25%) per annum of the face amount of each Letter of Credit issued,
upon the issuance, each anniversary of the issuance, and the renewal of such
Letter of Credit by Bank;


 


(d)           Unused
Revolving Line Facility Fee.  A fee
(the “Unused Revolving Line Facility Fee”),
payable quarterly, in arrears, on a calendar year basis, in an amount equal to
one-quarter of one percent (0.25%) per annum of the average unused portion of
the Revolving Line, as reasonably determined by Bank.  The unused portion of the Revolving Line, for
the purposes of this calculation, shall include amounts reserved under the Cash
Management Services Sublimit for products provided and under the Foreign
Exchange Sublimit for FX Forward Contracts. For purposes of this calculation,
the outstanding principal amount of Term Advances shall be included as usage
under the Revolving Line.  Borrower shall
not be entitled to any credit, rebate or repayment of any Unused Revolving Line
Facility Fee previously earned by Bank pursuant to this Section notwithstanding
any termination of the Agreement or the suspension or termination of Bank’s
obligation to make loans and advances hereunder; and


 


(e)           Bank
Expenses.  All Bank Expenses incurred
through and after the Effective Date, when due.


 


3              CONDITIONS
OF LOANS


 


3.1          Conditions
Precedent to Initial Credit Extension.  Bank’s obligation to make the initial Credit
Extension is subject to the condition precedent that Bank shall have received,
in form and substance satisfactory to Bank, such documents, and completion of
such other matters, as Bank may reasonably request as being necessary or
appropriate, including, without limitation:


 


(a)           duly
executed original signatures to the Loan Documents dated prior to or as of the
Effective Date to which it is a party;


 


(b)           duly
executed original signatures to the Control Agreement[s];


 


(c)           Borrower’s
Operating Documents and a good standing certificate of Borrower certified by
the Secretary of State of the State of Delaware (for EnerNOC) or the Secretary
of the Commonwealth of Massachusetts (for EnerNOC Securities) as of a date no
earlier than thirty (30) days prior to the Effective Date;


 


(d)           duly
executed original signatures to the completed Borrowing Resolutions for
Borrower;


 


(e)           certified
copies, dated as of a recent date, of financing statement searches, as Bank
shall reasonably request, accompanied by written evidence (including any UCC
termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection
with the initial Credit Extension, will be terminated or released;


 


(f)            a
fully-executed landlord’s consent with respect to Borrower’s leased location at
One Summer Street, Boston, Massachusetts 02110, in favor of Bank;


 


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(g)           a legal
opinion of Borrower’s counsel dated as of the Effective Date together with the
duly executed original signatures thereto;


 


(h)           evidence
satisfactory to Bank that the insurance policies required by Section 6.5
hereof are in full force and effect, together with appropriate evidence showing
loss payable and/or additional insured clauses or endorsements in favor of
Bank; and


 


(i)            payment
of the fees and Bank Expenses then due as specified in Section 2.5 hereof.


 


3.2          Conditions
Precedent to all Credit Extensions.  Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following:


 


(a)           timely
receipt of a Notice of Borrowing;


 


(b)           the
representations and warranties in Section 5 shall be true in all material respects
on the date of the Notice of Borrowing and on the effective date of each Credit
Extension; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Event of Default shall have occurred and be continuing or result from the
Credit Extension.  Each Credit Extension
is Borrower’s representation and warranty on that date that the representations
and warranties in Section 5 remain true in all material respects as of the
date thereof; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date; and


 


(c)           in
Bank’s reasonable discretion, there has not been a Material Adverse Change, or
any material adverse deviation by Borrower from the most recent business plan
of Borrower presented to and accepted by Bank.


 


3.3          Covenant
to Deliver. Borrower agrees to deliver to Bank each item
required to be delivered to Bank under this Agreement as a condition to any
Credit Extension.  Borrower expressly
agrees that the extension of a Credit Extension prior to the receipt by Bank of
any such item shall not constitute a waiver by Bank of Borrower’s obligation to
deliver such item, and any such Credit Extension in the absence of a required
item shall be in Bank’s sole discretion.


 


3.4          Procedure
for the Borrowing of Credit Extensions.


 


(a)           Subject to the prior satisfaction of
all other applicable conditions to the making of a Credit Extension set forth
in this Agreement, each Credit Extension shall be made upon Borrower’s
irrevocable written notice delivered to Bank in the form of a Notice of
Borrowing, each executed by a Responsible Officer of Borrower or his or her
designee or without instructions if the Credit Extensions are necessary to meet
Obligations which have become due.  Bank
may rely on any telephone notice given by a person whom Bank reasonably
believes is a Responsible Officer or designee. 
Borrower will indemnify Bank for any loss Bank suffers due to such
reliance.  Such Notice of Borrowing must
be received by Bank prior to 11:00 a.m. Pacific time, (i) at least three (3) Business Days
prior to the requested Funding Date, in the case of LIBOR Credit Extensions,
and (ii) at
least one (1) Business Day prior to the requested Funding Date, in the
case of Prime Rate Credit Extensions, specifying:


 


(1)           the amount of the Credit Extension,
which, if a LIBOR Credit Extension is requested, shall be in an aggregate
minimum principal amount of $1,000,000 or in any integral multiple of
$1,000,000 in excess thereof;


 


(2)           the requested Funding Date;


 


(3)           whether the Credit Extension is to be
comprised of LIBOR Credit Extensions or Prime Rate Credit Extensions; and


 


(4)           the duration of the Interest Period
applicable to any such LIBOR Credit Extensions included in such notice; provided that if the Notice of Borrowing shall fail to
specify the duration of the Interest Period for any Credit Extension comprised
of LIBOR Credit Extensions, such Interest Period shall be one (1) month.


 


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(b)           The
proceeds of all such Credit Extensions will then be made available to Borrower
on the Funding Date by Bank by transfer to the Designated Deposit Account and,
subsequently, by wire transfer to such other account as Borrower may instruct
in the Notice of Borrowing.  No Credit
Extensions shall be deemed made to Borrower, and no interest shall accrue on
any such Credit Extension, until the related funds have been deposited in the
Designated Deposit Account.


 


3.5          Conversion
and Continuation Elections.


 


(a)           So long as (i) no Event of
Default or Default exists; (ii) Borrower shall not have sent any notice of
termination of this Agreement; and (iii) Borrower shall have complied with
such customary procedures as Bank has established from time to time upon notice
to Borrower for Borrower’s requests for LIBOR Credit Extensions, Borrower may,
upon irrevocable written notice to Bank:


 


(1)           elect to convert on any Business Day,
Prime Rate Credit Extensions in an amount equal to One Million Dollars
($1,000,000.00) or any integral multiple of One Million Dollars ($1,000,000.00)
in excess thereof into LIBOR Credit Extensions;


 


(2)           elect to continue on any Interest
Payment Date any LIBOR Credit Extensions maturing on such Interest Payment Date
(or any part thereof in an amount equal to One Million Dollars ($1,000,000.00)
or any integral multiple of One Million Dollars ($1,000,000.00) in excess
thereof); provided, that if the aggregate amount
of LIBOR Credit Extensions shall have been reduced, by payment, prepayment, or
conversion of part thereof, to be less than One Million Dollars
($1,000,000.00), such LIBOR Credit Extensions shall automatically convert into
Prime Rate Credit Extensions, and on and after such date the right of Borrower
to continue such Credit Extensions as, and convert such Credit Extensions into,
LIBOR Credit Extensions shall terminate; or


 


(3)           elect to convert on any Interest
Payment Date any LIBOR Credit Extensions maturing on such Interest Payment Date
(or any part thereof in an amount equal to One Million Dollars ($1,000,000.00)
or any integral multiple of One Million Dollars ($1,000,000.00) in excess
thereof) into Prime Rate Credit Extensions.


 


(b)           Borrower
shall deliver a Notice of Conversion/Continuation in accordance with Section 10 to be received by Bank prior to 11:00 a.m.
Pacific time at least (i) three
(3) Business Days in advance of the Conversion Date or Continuation Date,
if any Credit Extensions are to be converted into or continued as LIBOR Credit
Extensions; and (ii) one
(1) Business Day in advance of the Conversion Date, if any Credit
Extensions are to be converted into Prime Rate Credit Extensions, in each case
specifying the:


 


(1)           proposed Conversion Date or
Continuation Date;


 


(2)           aggregate amount of the Credit
Extensions to be converted or continued which, if any Credit Extensions are to
be converted into or continued as LIBOR Credit Extensions, shall be in an
aggregate minimum principal amount of One Million Dollars ($1,000,000.00) or in
any integral multiple of One Million Dollars ($1,000,000.00) in excess thereof;


 


(3)           nature of the proposed conversion or
continuation; and


 


(4)           duration of the requested Interest
Period.


 


(c)           If
upon the expiration of any Interest Period applicable to any LIBOR Credit
Extensions, Borrower shall have failed to timely select a new Interest Period
to be applicable to such LIBOR Credit Extensions, Borrower shall be deemed to
have elected to convert such LIBOR Credit Extensions into Prime Rate Credit
Extensions.


 


(d)           Any
LIBOR Credit Extensions shall, at Bank’s option, convert into Prime Rate Credit
Extensions in the event that (i) an Event of Default or Default shall
exist, or (ii) the aggregate principal amount of the Prime Rate Credit
Extensions which have been previously converted to LIBOR Credit Extensions, or
the aggregate principal amount of existing LIBOR Credit Extensions continued,
as the case may be, at the beginning of an Interest Period shall at any time
during such Interest Period exceed the Revolving Line.  Borrower agrees to pay Bank, upon demand by
Bank (or Bank may, at its option, charge the Designated Deposit Account or any
other account (other than any payroll, trust, or escrow accounts) Borrower
maintains with Bank) any amounts required to


 


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compensate Bank
for any loss (including loss of anticipated profits), cost, or expense incurred
by Bank, as a result of the conversion of LIBOR Credit Extensions to Prime Rate
Credit Extensions pursuant to this Section 3.5(d).


 


(e)           Notwithstanding anything to the
contrary contained herein, Bank shall not be required to purchase United States
Dollar deposits in the London interbank market or other applicable LIBOR market
to fund any LIBOR Credit Extensions, but the provisions hereof shall be deemed to
apply as if Bank had purchased such deposits to fund the LIBOR Credit
Extensions.


 


3.6          Special
Provisions Governing LIBOR Credit Extensions.


 


Notwithstanding any other
provision of this Agreement to the contrary, the following provisions shall
govern with respect to LIBOR Credit Extensions as to the matters covered:


 


(a)           Determination
of Applicable Interest Rate.  As soon
as practicable on each Interest Rate Determination Date, Bank shall determine
(which determination shall, absent manifest error in calculation, be final,
conclusive and binding upon all parties) the interest rate that shall apply to
the LIBOR Credit Extensions for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to Borrower.


 


(b)           Inability
to Determine Applicable Interest Rate. 
In the event that Bank shall have determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any LIBOR Credit Extension, that by
reason of circumstances affecting the London interbank market adequate and fair
means do not exist for ascertaining the interest rate applicable to such Credit
Extension on the basis provided for in the definition of LIBOR, Bank shall on
such date give notice (by facsimile or by telephone confirmed in writing) to
Borrower of such determination, whereupon (i) no Credit Extensions may be
made as, or converted to, LIBOR Credit Extensions until such time as Bank
notifies Borrower that the circumstances giving rise to such notice no longer
exist, and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to Credit Extensions in
respect of which such determination was made shall be deemed to be rescinded by
Borrower.


 


(c)           Compensation
for Breakage or Non-Commencement of Interest Periods.  Borrower shall compensate Bank, upon written
request by Bank (which request shall set forth the manner and method of
computing such compensation), for all reasonable losses, expenses and
liabilities, if any (including any interest paid by Bank to lenders of funds
borrowed by it to make or carry its LIBOR Credit Extensions and any loss,
expense or liability incurred by Bank in connection with the liquidation or
re-employment of such funds) such that Bank may incur: (i) if for any
reason (other than a default by Bank or due to any failure of Bank to fund
LIBOR Credit Extensions due to inability to determine the applicable interest
rate under Section 3.6(b) or impracticability or illegality under
Sections 3.7(d) and 3.7(e)) a borrowing or a conversion to or continuation
of any LIBOR Credit Extension does not occur on a date specified in a Notice of
Borrowing or a Notice of Conversion/Continuation, as the case may be, or (ii) if
any principal payment or any conversion of any of its LIBOR Credit Extensions
occurs on a date prior to the last day of an Interest Period applicable to that
Credit Extension.


 


(d)           Assumptions
Concerning Funding of LIBOR Credit Extensions.  Calculation of all amounts payable to Bank
under this Section 3.6 and under Section 3.4 shall be made as though
Bank had actually funded each of its relevant LIBOR Credit Extensions through
the purchase of a Eurodollar deposit bearing interest at the rate obtained
pursuant to the definition of LIBOR Rate in an amount equal to the amount of
such LIBOR Credit Extension and having a maturity comparable to the relevant
Interest Period; provided, however, that Bank may
fund each of its LIBOR Credit Extensions in any manner it sees fit and the
foregoing assumptions shall be utilized only for the purposes of calculating
amounts payable under this Section 3.6 and under Section 3.4.


 


(e)           LIBOR Credit Extensions After
Default.  After the occurrence and
during the continuance of an Event of Default, (i) Borrower may not elect
to have a Credit Extension be made or continued as, or converted to, a LIBOR
Credit Extension after the expiration of any Interest Period then in effect for
such Credit Extension and (ii) subject to the provisions of Section 3.6(c),
any Notice of Conversion/Continuation given by Borrower with respect to a
requested conversion/continuation that has not yet occurred shall be deemed to
be rescinded by Borrower and be deemed a request to convert or continue Credit
Extensions referred to therein as Prime Rate Credit Extensions.


 


8





















 


3.7          Additional
Requirements/Provisions Regarding LIBOR Credit Extensions.


 


(a)           If
for any reason (including voluntary or mandatory prepayment or acceleration),
Borrower pays to Bank all or part of the principal amount of a LIBOR Credit
Extension prior to the last day of the Interest Period for such Credit
Extension, Borrower shall immediately notify Borrower’s account officer at Bank
and, on demand by Bank, pay Bank the amount (if any) by which (i) the
additional interest which would have been payable on the amount so received had
it not been received until the last day of such Interest Period exceeds (ii) the
interest which would have been recoverable by Bank by placing the amount so
received on deposit in the certificate of deposit markets, the offshore
currency markets, or United States Treasury investment products, as the case may
be, for a period starting on the date on which it was so received and ending on
the last day of such Interest Period at the interest rate determined by Bank in
its reasonable discretion.  Bank’s
determination as to such amount shall be conclusive absent manifest error.


 


(b)           Borrower
shall pay Bank, upon demand by Bank, from time to time such amounts as Bank may
reasonably determine to be necessary to compensate it for any costs incurred by
Bank that Bank reasonably determines are attributable to its making or
maintaining of any amount receivable by Bank hereunder in respect of any Credit
Extensions relating thereto (such increases in costs and reductions in amounts
receivable being herein called “Additional Costs”),
in each case resulting from any Regulatory Change which:


 


(i)            changes
the basis of taxation of any amounts payable to Bank by Borrower under this
Agreement in respect of any Credit Extensions (other than changes which affect
taxes measured by or imposed on the overall net income or gross receipts of
Bank by any jurisdiction in which Bank has its principal office);


 


(ii)           imposes
or modifies any reserve, special deposit or similar requirements relating to
any extensions of credit or other assets of, or any deposits with, or other
liabilities of Bank relating to Borrower or this Agreement (including any
Credit Extensions or any deposits referred to in the definition of LIBOR); or


 


(iii)          imposes
any other condition affecting this Agreement (or any of such extensions of
credit or liabilities relating to Borrower).


 


Bank will notify Borrower of
any event occurring after the Closing Date which will entitle Bank to
compensation pursuant to this Section 3.7 as promptly as practicable after
it obtains knowledge thereof and determines to request such compensation.  Bank will furnish Borrower with a statement
setting forth in reasonable detail the basis and amount of each request by Bank
for compensation under this Section 3.7. 
Determinations and allocations by Bank for purposes of this Section 3.7
of the effect of any Regulatory Change on its costs of maintaining its
obligations to make Credit
Extensions, of making or maintaining Credit Extensions, or on amounts receivable
by it in respect of Credit
Extensions, and of the additional amounts required to compensate Bank in respect
of any Additional Costs, shall be conclusive absent manifest error.


 


(c)           If
Bank shall determine that the adoption or implementation of any applicable law,
rule, regulation, or treaty regarding capital adequacy, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with any respect or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank, or comparable agency, has or would have the effect of reducing
the rate of return on capital of Bank or any person or entity controlling Bank
(a “Parent”) as a consequence of its
obligations hereunder to a level below that which Bank (or its Parent) could
have achieved but for such adoption, change, or compliance (taking into
consideration policies with respect to capital adequacy) by an amount deemed by
Bank to be material, then from time to time, within fifteen (15) days after
demand by Bank (made by Bank as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation), Borrower shall
pay to Bank such additional amount or amounts as will compensate Bank for such
reduction.  A statement of Bank claiming
compensation under this Section 3.7(c) and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive
absent manifest error.


 


(d)           If,
at any time, Bank, in its sole and absolute discretion, determines that (i) the
amount of LIBOR Credit Extensions for periods equal to the corresponding
Interest Periods are not available to Bank in the offshore currency interbank markets,
or (ii) LIBOR does not accurately reflect the cost to Bank of lending the
LIBOR Credit Extensions, then Bank shall promptly give notice thereof to
Borrower.  Upon the giving of such
notice, Bank’s obligation to make the LIBOR Credit Extensions shall terminate; provided, however, Credit Extensions shall not terminate if
Bank and Borrower agree in writing to a different interest rate applicable to
LIBOR Credit Extensions.


 


9






 












 


(e)           If it shall become unlawful for Bank
to continue to fund or maintain any LIBOR Credit Extensions, or to perform its
obligations hereunder, upon demand by Bank, Borrower shall either prepay the
LIBOR Credit Extensions in full with accrued interest thereon and all other
amounts payable by Borrower hereunder (including, without limitation, any
amount payable in connection with such prepayment pursuant to Section 3.7(a))
or convert such LIBOR Credit Extensions to Prime Rate Credit Extensions.  Notwithstanding the foregoing, to the extent
a determination by Bank as described above relates to a LIBOR Credit Extensions
then being requested by Borrower pursuant to a Notice of Borrowing or a Notice
of Conversion/Continuation, Borrower shall have the option, subject to the
provisions of Section 3.6(c), to (i) rescind such Notice of Borrowing
or Notice of Conversion/Continuation by giving notice (by facsimile or by
telephone confirmed in writing) to Bank of such rescission on the date on which
Bank gives notice of its determination as described above, or (ii) modify
such Notice of Borrowing or Notice of Conversion/Continuation to obtain a Prime
Rate Credit Extension or to have outstanding Credit Extensions converted into
or continued as Prime Rate Credit Extensions by giving notice (by facsimile or
by telephone confirmed in writing) to Bank of such modification on the date on
which Bank gives notice of its determination as described above.


 


4              CREATION
OF SECURITY INTEREST


 


4.1          Grant
of Security Interest.  Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing
security interest in, and pledges to Bank, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and products
thereof.  Borrower represents, warrants,
and covenants that the security interest granted herein is and shall at all
times continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens that may have superior priority to
Bank’s Lien under this Agreement).  If
Borrower shall acquire a commercial tort claim, Borrower shall promptly notify
Bank in a writing signed by Borrower of the general details thereof and grant
to Bank in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance reasonably satisfactory to Bank.


 


If this Agreement is terminated, Bank’s Lien in the
Collateral shall continue until the Obligations (other than inchoate indemnity
obligations) are repaid in full in cash and shall thereupon terminate.  Upon payment in full in cash of the
Obligations and at such time as Bank’s obligation to make
Credit Extensions has terminated, Bank shall, at Borrower’s sole cost and
expense, release its Liens in the Collateral and all rights therein shall
revert to Borrower.


 


4.2          Authorization
to File Financing Statements.  Borrower
hereby authorizes Bank to file financing statements, without notice to
Borrower, with all appropriate jurisdictions to perfect or protect Bank’s
interest or rights hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed to violate
the rights of Bank under the Code.  Such
financing statements may indicate the Collateral as “all assets of the Debtor”
or words of similar effect, or as being of an equal or lesser scope, or with
greater detail, all in Bank’s discretion. 
Upon Borrower’s request, Bank will provide Borrower with copies of all
UCC financing statements filed by Bank against Borrower.


 


5             REPRESENTATIONS
AND WARRANTIES


 


 Borrower represents and warrants as follows:


 


5.1          Due
Organization, Authorization; Power and Authority. 
Borrower and each of its Subsidiaries are duly existing and in good
standing as Registered Organizations in their jurisdiction of formation and are
qualified and licensed to do business and are in good standing in any
jurisdiction in which the conduct of their business or its ownership of property
requires that they be qualified except where the failure to do so could not
reasonably be expected to have a material adverse effect on Borrower’s or its
Subsidiaries’ business.  In connection
with this Agreement, Borrower has delivered to Bank a completed certificate  signed by Borrower (the “Perfection Certificate”). 
Borrower represents and warrants to Bank that (a) Borrower’s exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof; (b) Borrower is an organization of the type and is
organized in the jurisdiction set forth in the Perfection Certificate; (c) the
Perfection Certificate accurately sets forth Borrower’s organizational
identification number or accurately states that Borrower has none; (d) the
Perfection Certificate accurately sets forth Borrower’s place of business, or,
if more than one, its chief executive office as well as Borrower’s mailing
address (if different than its chief executive office); (e) Borrower (and
each of its predecessors)  has not, in the
past five (5) years, changed its jurisdiction of formation, organizational
structure or type, or any organizational number assigned by its jurisdiction;
and (f) all other information set forth on the Perfection Certificate
pertaining to Borrower and each of its Subsidiaries is accurate and complete
taken as a whole (it being understood and agreed that Borrower may from time to
time update certain information in the Perfection 


 


10





















 


Certificate after
the Effective Date to the extent permitted by one or more specific provisions
in this Agreement).  If Borrower is not
now a Registered Organization but later becomes one, Borrower shall promptly
notify Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.


 


The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or any
of its Subsidiaries or any of their property or assets may be bound or
affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect), or (v) constitute an event of default under any
material agreement by which Borrower is bound. 
Borrower is not in default under any agreement to which it is a party or
by which it is bound in which the default could reasonably be expected to have
a material adverse effect on Borrower’s business.


 


5.2          Collateral. 
Borrower has good title to, has rights in, and the power to transfer
each item of the Collateral upon which it purports to grant a Lien hereunder,
free and clear of any and all Liens except Permitted Liens.  Borrower has no deposit accounts other than
the deposit accounts with Bank, the deposit accounts, if any, described in the
Perfection Certificate delivered to Bank in connection herewith, or of which
Borrower has given Bank notice and taken such actions as are necessary to give
Bank a perfected security interest therein. 
The Accounts are bona fide, existing obligations of the Account Debtors.


 


The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate.  Other than mobile equipment in the possession
of Borrower’s employees or agents, none of the components of the Collateral
shall be maintained at locations other than as provided in the Perfection
Certificate or as permitted pursuant to Section 7.2.  In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any portion of the Collateral
with an aggregate value in excess of Five Hundred Thousand Dollars
($500,000.00) to a bailee, then Borrower will first receive the written consent
of Bank and such bailee must execute and deliver a bailee agreement in form and
substance satisfactory to Bank in its reasonable discretion.


 


Except
as noted on the Perfection Certificate, Borrower is not a party to, nor is
bound by, any material license or other agreement with respect to which
Borrower is the licensee (a) that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or any other property, or (b) for which a default
under or termination of could interfere with the Bank’s right to sell any
Collateral.  Borrower shall provide
written notice to Bank within thirty (30) days of entering or becoming bound by
any such license or agreement (other than over-the-counter software that is
commercially available to the public). 
Borrower shall take such steps as Bank reasonably requests to obtain the
consent of, or waiver by, any person whose consent or waiver is necessary for (x) all
such licenses or agreements to be deemed “Collateral” and for Bank to have a
security interest in it that might otherwise be restricted or prohibited by law
or by the terms of any such license or agreement, whether now existing or
entered into in the future, and (y) Bank to have the ability in the event
of a liquidation of any Collateral to dispose of such Collateral in accordance
with Bank’s rights and remedies under this Agreement and the other Loan
Documents.


 


5.3          Litigation. 
There are no actions or proceedings pending or, to the knowledge of the
Responsible Officers, threatened in writing by or against Borrower or any of
its Subsidiaries which, if adversely determined, could reasonably be expected
to have a material adverse effect on Borrower’s business.


 


5.4          No
Material Deterioration in Financial Statements.  All
consolidated financial statements for Borrower and its Subsidiaries delivered
to Bank fairly present in all material respects Borrower’s consolidated
financial condition and Borrower’s consolidated results of operations as of the
date thereof.  There has not been any
material deterioration in Borrower’s consolidated financial condition since the
date of the most recent financial statements of Borrower submitted to Bank.


 


5.5          Solvency. 
The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; Borrower is not
left with unreasonably small capital after the transactions in this Agreement;
and Borrower is able to pay its debts (including trade debts) as they mature.


 


5.6          Regulatory
Compliance.  Borrower is not an “investment company” or a
company “controlled” by an “investment company” under the Investment Company
Act of 1940, as amended.  Borrower is not
engaged as one of its important activities in extending credit for margin stock
(under Regulations X, T and U of the Federal 


 


11





















 


Reserve Board of
Governors).  Borrower has complied in all
material respects with the Federal Fair Labor Standards Act.  Neither Borrower nor any of its Subsidiaries
is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary
company” of a “holding company” as each term is defined and used in the Public
Utility Holding Company Act of 2005. 
Borrower has not violated any laws, ordinances or rules, the violation
of which could reasonably be expected to have a material adverse effect on its
business.  None of Borrower’s or any of
its Subsidiaries’ properties or assets has been used by Borrower or any
Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other
than legally.  Borrower and each of its
Subsidiaries have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all Government
Authorities that are necessary to continue their respective businesses as
currently conducted except where the failure to do so could not reasonably be
expected to have a material adverse effect on Borrower’s business.


 


5.7          Subsidiaries;
Investments.  Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.


 


5.8          Tax
Returns and Payments; Pension Contributions.  Borrower has
timely filed all required tax returns and reports, and Borrower and its
Subsidiaries have timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower.  Borrower may defer payment of any contested
taxes, provided that Borrower (a) in good faith contests its obligation to
pay the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Bank in writing of the commencement of, and any
material development in, the proceedings, (c) posts bonds or takes any
other steps required to prevent the governmental authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other
than a “Permitted Lien”.  Borrower is
unaware of any claims or adjustments proposed for any of Borrower’s prior tax
years which could result in additional taxes becoming due and payable by
Borrower.  Borrower has paid all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from
participation in, and has not permitted partial or complete termination of, or
permitted the occurrence of any other event with respect to, any such plan
which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.


 


5.9          Use
of Proceeds.  Borrower shall use the proceeds of the Credit
Extensions solely as working capital and  to fund its
general business requirements and not for personal, family, household or
agricultural purposes.


 


5.10        Indebtedness;
Liens.  Borrower does not have any Indebtedness to
The Monroe Fund LLC or Trillium Capital Partners LLC, and neither The Monroe
Fund LLC nor Trillium Capital Partners LLC has any Lien on any of Borrower’s
property.


 


5.11        Full
Disclosure.  No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank in
connection with the Loan Documents, as of the date such representation,
warranty, or other statement was made, taken together with all such written
certificates and written statements given to Bank in connection with the Loan
Documents, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements, in light of the circumstances in which they were made, not
misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are
not viewed as facts and that actual results during the period or periods
covered by such projections and forecasts may differ from the projected or
forecasted results).


 


6              AFFIRMATIVE COVENANTS


 


Borrower shall do all of
the following:


 


6.1          Government
Compliance.


 


(a)           Except as permitted by Section 7.3,
maintain its and all its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
have a material adverse effect on Borrower’s business or operations.  Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, the noncompliance with which could reasonably be expected to have a
material adverse effect on Borrower’s business.


 


12





















 


(b)           Obtain all of the Governmental
Approvals necessary for the performance by Borrower of its obligations under
the Loan Documents to which it is a party and the grant of a security interest
to Bank in all of the Collateral. 
Borrower shall promptly provide copies of any such obtained Governmental
Approvals to Bank.


 


6.2          Financial
Statements, Reports, Certificates.


 


(a)           Deliver
to Bank:  (i) as soon as available,
but no later than forty-five (45) days after the last day of each quarter, a
company prepared consolidated and consolidating balance sheet and income
statement covering Borrower’s consolidated and consolidating operations during
the period certified by a Responsible Officer on Form 10-Q as filed with
the Securities and Exchange Commission; (ii) as soon as available, but no
later than ninety (90) days after the last day of Borrower’s fiscal year,
audited consolidated financial statements prepared under GAAP on form 10-K,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm of national
reputation or otherwise reasonably acceptable to Bank in its reasonable
discretion; (iii) within five (5) days of delivery, copies of all statements,
reports and notices made available to Borrower’s security holders or to any
holders of Subordinated Debt; (iv) within five (5) days after filing,
all reports on form 8-K, 10-K and 10-Q filed with the Securities and Exchange
Commission; (v) a prompt report of any legal actions pending or threatened
in writing against Borrower or any of its Subsidiaries that, if adversely
determined, could reasonably be expected to have a material adverse effect on
Borrower’s business; (vi) as soon as available, but no later than sixty
(60) days after the last day of Borrower’s fiscal years, and contemporaneously
with any updates thereto, Borrower’s board-approved projections for the
subsequent fiscal year; and (vii) budgets, sales projections, operating
plans and other financial information of Borrower reasonably requested by Bank.


 


Borrower’s
10-K, 10-Q, and 8-K reports required to be delivered pursuant to this Section 6.2(a) shall
be deemed to have been delivered on the date on which Borrower posts such
report or provides a link thereto on Borrower’s or another website on the
internet.


 


(b)           Within
forty-five (45) days after the last day of each month, deliver to Bank with the
monthly financial statements, a
duly completed Compliance Certificate signed by a Responsible Officer setting
forth calculations showing compliance with the financial covenants set forth in
Section 6.7.


 


(c)           Upon
Bank’s request (which, prior to the occurrence and continuance of an Event of
Default shall not occur more than one (1) time per month), deliver to Bank
aged listings of accounts receivable and accounts payable (by invoice date) and
a statement of Borrower’s cash balances for all of its accounts that are not
maintained with Bank, in a form reasonably acceptable to Bank.


 


(d)           Allow
Bank to audit Borrower’s Collateral at Borrower’s expense.   Such audits shall be conducted no
more often than once every twelve (12) months unless an Event of Default has
occurred and is continuing.


 


6.3          Intentionally
omitted.


 


6.4          Taxes; Pensions. 
Timely file, and require each of its Subsidiaries to timely file, all
required tax returns and reports and timely pay, and require each of its
Subsidiaries to timely file, all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower and each of its
Subsidiaries, except for deferred payment of any taxes contested pursuant to
the terms of Section 5.8 hereof, and shall deliver to Bank, on its
reasonable request, appropriate certificates attesting to such payments, and
pay all amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their terms.


 


6.5          Insurance. 
Keep its business and the Collateral insured for risks and in amounts
standard for companies in Borrower’s industry and location and as Bank may
reasonably request.  Insurance policies
shall be in a form, with companies, and in amounts that are satisfactory to
Bank, it being agreed that the insurance maintained by Borrower as of the
Effective Date is satisfactory to Bank as of the Effective Date.  All property policies shall have a lender’s
loss payable endorsement showing Bank as lender loss payee and waive
subrogation against Bank, and all liability policies shall show, or have
endorsements showing, Bank as an additional insured.  All policies (or the loss payable and
additional insured endorsements) shall provide that (a) for property
policies, the insurer or its agent must give Bank at least twenty (20) days
notice before canceling, amending, or declining to renew its policy, and (b) for
general liability policies, the insurer or its agent will endeavor to give Bank
at least twenty (20) days notice before canceling, amending, or declining to
renew its policy.  At Bank’s reasonable
request, Borrower shall deliver certified copies of policies and evidence of
all premium payments.  Proceeds payable
under any policy shall, at Bank’s option, be payable to Bank on account of the
Obligations.   Notwithstanding the
foregoing, (a) so long as no 


 


13





















 


Event of Default
has occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy toward the replacement or repair of destroyed
or damaged property; provided that any such replaced or repaired property (i) shall
be of equal or like value as the replaced or repaired Collateral and (ii) shall
be deemed Collateral in which Bank has been granted a first priority security
interest, and (b) after the occurrence and during the continuance of an
Event of Default, all proceeds payable under such casualty policy shall, at the
option of Bank, be payable to Bank on account of the Obligations.  If Borrower fails to obtain insurance as
required under this Section 6.5 or to pay any amount or furnish any required
proof of payment to third persons and Bank, Bank may upon notice to Borrower
make all or part of such payment or obtain such insurance policies required in
this Section 6.5, and take any action under the policies Bank deems
prudent.


 


6.6          Operating
Accounts.


 


(a)           Within
thirty (30) days of the Effective Date, maintain its and its Subsidiaries’
primary operating and depository accounts with Bank.  In addition, Borrower and its Subsidiaries
shall maintain their cash and securities with Bank and/or SVB Securities in
excess of that amount used use Borrower’s and such Subsidiaries’ current
operations in an amount equal to the lesser of (i) seventy-five percent
(75.0%) of the amount of such excess cash and securities, and (ii) Thirty-Five
Million Dollars ($35,000,000.00).  Any
Guarantor that is an Affiliate of Borrower shall maintain seventy-five
percent (75.0%) of its funds in depository,
operating and securities accounts with Bank or SVB Securities.


 


(b)           Provide
Bank five (5) days prior written notice before establishing any Collateral
Account at or with any bank or financial institution other than Bank or its
Affiliates.  In addition, for each
Collateral Account that Borrower or
Guarantor at any time maintains, Borrower shall cause the applicable
bank or financial institution (other than Bank) at or with which any Collateral
Account is maintained to execute and deliver a Control Agreement or other
appropriate instrument with respect to such Collateral Account to perfect Bank’s
Lien in such Collateral Account in accordance with the terms hereunder, which
Control Agreement may not be terminated without the prior written consent of
Bank.  The provisions of the previous
sentence shall not apply to deposit accounts exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the
benefit of Borrower’s employees and identified to Bank by Borrower as such.


 


(c)           Notwithstanding
Section 6.6(b) above to the contrary, Borrower shall deliver to Bank,
within thirty (30) days of the Effective Date, a fully-executed Control
Agreement with respect to each of Borrower’s accounts with Morgan Stanley, in
form and substance acceptable to Bank in its sole and absolute discretion.


 


6.7          Financial
Covenants.


 


Borrower
shall maintain at all times, to be tested as of the last day of each month,
unless otherwise noted:


 


(a)           Quick Ratio.  A Quick Ratio of at least 1.85 to 1.0.


 


(b)           Tangible Net Worth.  To be tested as of the last day of each of
Borrower’s fiscal quarters, Tangible Net Worth of at least (i) Seventy
Million Dollars ($70,000,000.00) as of the quarters ending June 30, 2008, September 30,
2008 and December 31, 2008, (ii) Fifty-Five Million Dollars
($55,000,000.00) as of the quarter ending March 31, 2009, and (iii) Fifty
Million Dollars ($50,000,000.00) as of the quarter ending June 30, 2009
and as of the last day of each quarter thereafter.  Notwithstanding the foregoing, the amount
required in the prior sentence shall increase by an amount equal to fifty
percent (50.0%) of the gross proceeds received by Borrower from the sale of its
equity in financing transactions or the incurrence of Subordinated Debt after
the Effective Date.


 


6.8          Protection
of Intellectual Property Rights.  Borrower
shall:  (a) protect, defend and
maintain the validity and enforceability of its intellectual property that is
material to its business; (b) promptly advise Bank in writing of material
infringements of its material intellectual property; and (c) not allow any
intellectual property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent, unless
Borrower deems such abandonment, forfeiture, or dedication to be necessary or
appropriate in its reasonable business judgment.


 


6.9          Litigation
Cooperation.  From the date hereof and continuing through
the termination of this Agreement, make available to Bank during regular
business hours upon reasonable prior notice (provided that such limitations
shall not apply after the occurrence and continuance of an Event of Default),
without expense to Bank, Borrower and its officers, employees and agents and
Borrower’s books and records, to the extent that Bank may deem them reasonably
necessary to prosecute or defend any third-party suit or proceeding instituted
by or against Bank with respect to any Collateral or relating to Borrower.


 


14





















 


6.10        Landlord’s
Consent.  Deliver to Bank, within thirty (30) days of
the Effective Date, a fully-executed landlord’s consent with respect to Borrower’s
leased location at 2323 Bryant Street, Dallas, Texas 75284 in favor of Bank, in
form and substance acceptable to Bank in Bank’s reasonable discretion.


 


6.11        Further
Assurances.  Execute any further instruments and take
further action as Bank reasonably requests to perfect or continue Bank’s Lien
in the Collateral or to effect the purposes of this Agreement.  Deliver to Bank,  within five (5) days after the same are sent or
received, copies of all correspondence, reports, documents and other filings
with any Governmental Authority regarding compliance with or maintenance of
Governmental Approvals or Requirements of Law or that could reasonably be
expected to have a material effect on any of the Governmental Approvals or
otherwise on the operations of Borrower and its Subsidiaries.


 


7              NEGATIVE COVENANTS


 


Borrower shall not do any
of the following without Bank’s prior written consent:


 


7.1          Dispositions. 
Convey, sell, lease, transfer, assign, or otherwise dispose of
(collectively “Transfer”), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, except
for:


 


(a)           Transfers in the ordinary course of
business for reasonably equivalent consideration;


 


(b)           Transfers of property in connection
with sale-leaseback transactions;


 


(c)           Transfers of property to the extent
such property is exchanged for credit against, or proceeds are promptly applied
to, the purchase price of other property used or useful in the business of
Borrower or its Subsidiaries;


 


(d)           Transfers constituting non-exclusive
licenses and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business and other non-perpetual
licenses that may be exclusive in some respects other than territory (and/or
that may be exclusive as to territory only in specified geographical areas
outside of the United States), but that could not result in a legal transfer of
Borrower’s title in the licensed property;


 


(e)           Transfers otherwise permitted by the
Loan Documents;


 


(f)            sales or discounting of delinquent
accounts in the ordinary course of business;


 


(g)           Transfers associated with the making
or disposition of Permitted Investments;


 


(h)           Transfers in connection with a
permitted acquisition of a portion of the assets or rights acquired; and


 


(i)            Transfers of assets (other than
Accounts (unless such Transfer is in the ordinary course of Borrower’s
business)) not otherwise permitted in this Section 7.1, provided, that the
aggregate book value of all such Transfers by Borrower and its Subsidiaries,
together, shall not exceed in any fiscal year, five percent (5.0%) of Borrower’s
consolidated total assets as of the last day of the fiscal year immediately
preceding the date of determination.


 


7.2          Changes
in Business; Change in Control; Jurisdiction of Formation.. 
Engage in any material line of business other than those lines of
business conducted by Borrower and its Subsidiaries on the date hereof and any
businesses reasonably related, complementary or incidental thereto or
reasonable extensions thereof; permit or suffer any Change in Control.  Borrower will not, without prior written
notice, change its jurisdiction of formation.


 


7.3          Mergers
or Acquisitions.  Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any Person, or acquire, or permit
any of its Subsidiaries to acquire, all or substantially all of the capital
stock or property of any Person.  A
Subsidiary may merge or consolidate into another Subsidiary or into Borrower.


 


7.4          Indebtedness. 
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.


 


15





















 


7.5          Encumbrance. 
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest
granted herein,  or enter into any
agreement, document, instrument or other arrangement (except with or in favor
of Bank) with any Person which directly or indirectly prohibits or has the
effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging,
pledging, granting a security interest in or upon, or encumbering any of
Borrower’s or any Subsidiary’s intellectual property, except as is otherwise
permitted in Section 7.1 hereof and the definition of “Permitted Liens”
herein.


 


7.6          Maintenance
of Collateral Accounts.  Maintain any Collateral
Account except pursuant to the terms of Section 6.6(b) hereof.


 


7.7          Distributions; Investments. 
(a) Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock other than Permitted Distributions;
or (b) directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of
its Subsidiaries to do so.


 


7.8          Transactions
with Affiliates.  Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Borrower except for
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person.


 


7.9          Subordinated
Debt.  (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or (b) amend
any provision in any document relating to the Subordinated Debt which would
increase the amount thereof or adversely affect the subordination thereof to
Obligations owed to Bank.


 


7.10        Compliance. 
Become an “investment company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940, as amended, or undertake as
one of its important activities extending credit to purchase or carry margin
stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System), or use the proceeds of any Credit Extension for that purpose;
fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower’s business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.


 


8              EVENTS OF DEFAULT


 


Any one of the following
shall constitute an event of default (an “Event of Default”)
under this Agreement:


 


8.1          Payment
Default.  Borrower fails to (a) make any payment
of principal or interest on any Credit Extension on its due date, or (b) pay
any other Obligations within three (3) Business Days after such
Obligations are due and payable (which three (3) Business Day grace period
shall not apply to payments due on the Maturity Date).  During the cure period, the failure to cure
the payment default is not an Event of Default (but no Credit Extension will be
made during the cure period);


 


8.2          Covenant
Default.


 


(a)  Borrower fails
or neglects to perform any obligation in Sections 6.2 (other than Section 6.2(b)),
6.6, 6.7, or 6.10, or violates any covenant in Section 7;


 


(b)  Borrower fails
or neglects to perform any obligation in Section 6.2(b) and has
failed to cure the default within ten (10) days after the occurrence
thereof; or


 


(c)  Borrower fails
or neglects to perform, keep, or observe any other term, provision, condition,
covenant or agreement contained in this Agreement or any Loan Documents, and as
to any default (other than those 


 


16

















 


specified in this Section 8)
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts
by Borrower be cured within such ten (10) day period, and such default is
likely to be cured within a reasonable time, then Borrower shall have an
additional period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the
failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period).  Grace periods provided under this Section 8.2
shall not apply, among other things, to financial covenants or any other
covenants set forth in subsection (a) above;


 


8.3          Material
Adverse Change.  A Material Adverse Change occurs;


 


8.4          Attachment; Levy;
Restraint on Business.


 


(a)           (i) The service of process seeking
to attach, by trustee or similar process, any funds of Borrower or of any
entity under control of Borrower (including a Subsidiary) on deposit with Bank
or any Bank Affiliate, or (ii) a notice of lien, levy, or assessment is
filed against any of Borrower’s assets by any government agency, and the same
under subclauses (i) and (ii) hereof are not, within ten (10) days
after the occurrence thereof, discharged or stayed (whether through the posting
of a bond or otherwise); provided, however, no Credit Extensions shall be made
during any ten (10) day cure period; and


 


(b)           (i) any material portion of
Borrower’s assets is attached, seized, levied on, or comes into possession of a
trustee or receiver, or (ii) any court order enjoins, restrains, or
prevents Borrower  from conducting any
part of its business;


 


8.5          Insolvency (a) Borrower is unable to pay its
debts (including trade debts) as they become due or otherwise becomes
insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within forty-five (45) days (but no Credit Extensions shall be made while of
any of the conditions described in clause (a) exist and/or until any
Insolvency Proceeding is dismissed);


 


8.6          Other
Agreements.  If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Million Dollars
($1,000,000.00) or that could reasonably be expected to result in a Material
Adverse Change.


 


8.7          Judgments. 
One or more judgments, orders, or decrees for the payment of money in an
amount, individually or in the aggregate, of at least Two Hundred Fifty
Thousand Dollars ($250,000.00) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower and shall remain unsatisfied, unvacated, or
unstayed for a period of ten (10) days after the entry thereof (provided
that no Credit Extensions will be made prior to the satisfaction, vacation, or
stay of such judgment, order, or decree);


 


8.8          Misrepresentations. 
Borrower or any Person acting for Borrower makes any representation,
warranty, or other statement in this Agreement, any Loan Document or in any
writing delivered to Bank or to induce Bank to enter this Agreement or any Loan
Document, and such representation, warranty, or other statement is incorrect in
any material respect when made;


 


8.9          Subordinated
Debt.  A default or breach occurs under any
agreement between Borrower and any creditor of Borrower that signed a
subordination, intercreditor, or other similar agreement with Bank, or any
creditor that has signed such an agreement with Bank breaches any terms of such
agreement;


 


8.10        Guaranty.  (a) Any
guaranty of any Obligations terminates or ceases for any reason (other than
termination, discharge, or release by Bank) to be in full force and effect; (b) any
Guarantor does not perform any obligation or covenant under any guaranty of the
Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5,
8.7, or 8.8. occurs with respect to any Guarantor; (d) the death,
liquidation, winding up, or termination of existence of any Guarantor; or (e) (i) a
material impairment in the perfection or priority of Bank’s Lien in the
collateral provided by Guarantor or in the value of such collateral or (ii) a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospect of repayment of
the Obligations occurs with respect to any Guarantor; or


 


17





















 


8.11        Governmental Approvals. 
Any required Governmental Approval shall have been (a) revoked,
rescinded, suspended, modified in a material adverse manner or not renewed in
the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission,
suspension, modification or non-renewal (i) has, or could reasonably be
expected to have, a Material Adverse Change, or (ii) adversely affects the
legal qualifications of Borrower or any of its Subsidiaries to hold such
Governmental Approval in any applicable jurisdiction and such revocation,
rescission, suspension, modification or non-renewal could reasonably be
expected to materially adversely affect the status of or legal qualifications
of Borrower or any of its Subsidiaries to hold any required Governmental
Approval in any other jurisdiction.


 


9             BANK’S RIGHTS AND
REMEDIES


 


9.1          Rights
and Remedies.  While an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following, to the
extent not prohibited by applicable law:


 


(a)           declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);


 


(b)           stop
advancing money or extending credit for Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Bank;


 


(c)           demand
that Borrower (i) deposits cash with Bank in an amount equal to the
aggregate amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in
advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of any Letters of Credit;


 


(d)           terminate
any FX Forward Contracts;


 


(e)           settle
or adjust disputes and claims directly with Account Debtors for amounts on
terms and in any order that Bank considers advisable, notify any Person owing
Borrower money of Bank’s security interest in such funds, and verify the amount
of such account;


 


(f)            make
any payments and do any acts it considers necessary or reasonable to protect
the Collateral and/or its security interest in the Collateral.  Borrower shall assemble the Collateral if
Bank requests and make it available as Bank designates that is reasonably
convenient to Bank and Borrower.  Bank
may enter premises where the Collateral is located, take and maintain
possession of any part of the Collateral, and pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge by Borrower, to exercise any of
Bank’s rights or remedies;


 


(g)           apply
to the Obligations then due any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;


 


(h)           ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral.  Bank
is hereby granted a non-exclusive, royalty-free license or other right to use,
without charge, Borrower’s labels, patents, copyrights, mask works, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any similar property as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank’s exercise of its rights under this Section,
Borrower’s rights under all licenses and all franchise agreements inure to Bank’s
benefit;


 


(i)            place
a “hold” on any account maintained with Bank and/or deliver a notice of
exclusive control, any entitlement order, or other directions or instructions
pursuant to any Control Agreement or similar agreements providing control of
any Collateral;


 


(j)            demand
and receive possession of Borrower’s Books; and


 


(k)           exercise
all rights and remedies available to Bank under the Loan Documents or at law or
equity, including all remedies provided under the Code (including disposal of
the Collateral pursuant to the terms thereof).


 


18
















 


9.2          Power
of Attorney.  Borrower hereby irrevocably appoints Bank as
its lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to:  (a) endorse
Borrower’s name on any checks or other forms of payment or security; (b) sign
Borrower’s name on any invoice or bill of lading for any Account or drafts
against Account Debtors; (c) settle and adjust disputes and claims about
the Accounts directly with Account Debtors, for amounts and on terms Bank
determines reasonable; (d) make, settle, and adjust all claims under
Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Bank’s security interest in the Collateral
regardless of whether an Event of Default has occurred until all Obligations
(other than inchoate indemnity obligations) have been satisfied in full and
Bank is under no further obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an
interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions terminates.


 


9.3          Protective
Payments.  If Borrower fails to obtain the insurance
called for by Section 6.5 or fails to pay any premium thereon or fails to
pay any other amount which Borrower is obligated to pay under this Agreement or
any other Loan Document, Bank may obtain such insurance or make such payment,
and all amounts so paid by Bank are Bank Expenses and immediately due and
payable, bearing interest at the then highest applicable rate charged by Bank,
and secured by the Collateral.  Bank will
make reasonable efforts to provide Borrower with notice of Bank obtaining such
insurance at the time it is obtained or within a reasonable time thereafter.  No payments by Bank are deemed an agreement
to make similar payments in the future or Bank’s waiver of any Event of
Default.


 


9.4          Application of Payments
and Proceeds.  Borrower shall have no right to specify the
order or the accounts to which Bank shall allocate or apply any payments
required to be made by Borrower to Bank or otherwise received by Bank under
this Agreement when any such allocation or application is not specified
elsewhere in this Agreement.  If an Event
of Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower account balances, payments, proceeds realized
as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion.  Any
surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower shall remain liable to Bank for any deficiency.  If Bank, in its good faith business judgment,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral pursuant to Section 9.1,
Bank shall have the option, exercisable at any time, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Bank of cash therefor.


 


9.5          Bank’s
Liability for Collateral.  So long as Bank complies with
applicable law and reasonable banking practices regarding the safekeeping of
the Collateral in the possession or under the control of Bank, Bank shall not
be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman,
bailee, or other Person.  Borrower bears
all risk of loss, damage or destruction of the Collateral.


 


9.6          No
Waiver; Remedies Cumulative.  Bank’s
failure, at any time or times, to require strict performance by Borrower of any
provision of this Agreement or any other Loan Document shall not waive, affect,
or diminish any right of Bank thereafter to demand strict performance and
compliance herewith or therewith.  No
waiver hereunder shall be effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it is given.  Bank’s rights and remedies under this
Agreement and the other Loan Documents are cumulative.  Bank has all rights and remedies provided
under the Code, by law, or in equity. 
Bank’s exercise of one right or remedy is not an election, and Bank’s
waiver of any Event of Default is not a continuing waiver.  Bank’s delay in exercising any remedy is not
a waiver, election, or acquiescence.


 


9.7          Demand
Waiver.  Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at maturity, release, compromise, settlement, extension, or renewal of
accounts, documents, instruments, chattel paper, and guarantees held by Bank on
which Borrower is liable.


 


10           NOTICES


 


All notices, consents, requests,
approvals, demands, or other communication (collectively, “Communication”)
by any party to this Agreement or any other Loan Document must be in writing
and shall be deemed to have been validly served, given, or delivered: (a) upon
the earlier of actual receipt and three (3) Business Days after deposit in
the U.S. mail, first class, registered or certified mail return receipt
requested, with proper 


 


19

















 


postage prepaid; (b) upon
transmission, when sent by electronic mail or facsimile transmission; (c) one
(1) Business Day after deposit with a reputable overnight courier with all
charges prepaid; or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address, facsimile number, or email address indicated below.  Bank or Borrower may change its mailing or
electronic mail address or facsimile number by giving the other party written
notice thereof in accordance with the terms of this Section 10.


 


	
   

  	
  If to Borrower:

  	
   

  	
  EnerNOC, Inc. and EnerNOC Securities
  Corporation

  
	
   

  	
   

  	
   

  	
  75 Federal Street, Suite 300

  
	
   

  	
   

  	
   

  	
  Boston, Massachusetts 02110

  
	
   

  	
   

  	
   

  	
  Attn:  David
  M. Samuels, Executive Vice President

  
	
   

  	
   

  	
   

  	
  Fax:  (617)
  224-9910

  
	
   

  	
   

  	
   

  	
  Email:  dsamuels@enernoc.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
  Goodwin Procter LLP

  
	
   

  	
   

  	
   

  	
  53 State Street

  
	
   

  	
   

  	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
   

  	
   

  	
  Attn:

  	
  Mark D. Smith

  
	
   

  	
   

  	
   

  	
  Fax:

  	
  (617) 523-1231

  
	
   

  	
   

  	
   

  	
  Email:

  	
  marksmith@goodwinprocter.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to Bank:

  	
   

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
   

  	
  One Newton Executive Park,
  Suite 200

  
	
   

  	
   

  	
   

  	
  2221 Washington Street

  
	
   

  	
   

  	
   

  	
  Newton, Massachusetts
  02462

  
	
   

  	
   

  	
   

  	
  Attn:  Mr. David Rodriguez

  
	
   

  	
   

  	
   

  	
  Fax:  (617) 969-5478

  
	
   

  	
   

  	
   

  	
  Email:  DRodriguez@svb.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
  Riemer & Braunstein LLP

  
	
   

  	
   

  	
   

  	
  Three Center Plaza

  
	
   

  	
   

  	
   

  	
  Boston, Massachusetts 02108

  
	
   

  	
   

  	
   

  	
  Attn:  David
  A. Ephraim, Esquire

  
	
   

  	
   

  	
   

  	
  Fax:  (617)
  880-3456

  
	
   

  	
   

  	
   

  	
  Email:  DEphraim@riemerlaw.com

  



 


11           CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER


 


Massachusetts law governs the Loan Documents without
regard to principles of conflicts of law. 
Borrower and Bank each submit to the exclusive jurisdiction of the State
and Federal courts in Massachusetts; provided, however, that nothing in this
Agreement shall be deemed to operate to preclude Bank from bringing suit or
taking other legal action in any other jurisdiction to realize on the
Collateral or any other security for the Obligations, or to enforce a judgment
or other court order in favor of Bank. 
Borrower expressly submits and consents in advance to such jurisdiction
in any action or suit commenced in any such court, and Borrower hereby waives
any objection that it may have based upon lack of personal jurisdiction,
improper venue, or forum non conveniens and hereby consents to the granting of
such legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of
the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.


 


TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR
ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER
INTO THIS AGREEMENT.  EACH PARTY HAS
REVIEWED THIS WAIVER WITH ITS COUNSEL.


 


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12           GENERAL PROVISIONS


 


12.1        Successors
and Assigns.  This Agreement binds and is for the benefit
of the successors and permitted assigns of each party.  Borrower may not assign this Agreement or any
rights or obligations under it without Bank’s prior written consent (which may
be granted or withheld in Bank’s discretion). 
Bank has the right, without the consent of or notice to Borrower, to
sell, transfer, negotiate, or grant participation in all or any part of, or any
interest in, Bank’s obligations, rights, and benefits under this Agreement and
the other Loan Documents.


 


12.2        Indemnification. 
Borrower agrees to indemnify, defend and hold Bank and its directors,
officers, employees, agents, attorneys, or any other Person affiliated with or
representing Bank (each, an “Indemnified
Person”) harmless against:  (a) all
obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by such Indemnified Person from,
following, or arising from transactions between Bank and Borrower (including
reasonable attorneys’ fees and expenses), except for Claims and/or losses
directly caused by such Indemnified Person’s gross negligence or willful
misconduct.


 


12.3        Time
of Essence.  Time is of the essence for the performance of
all Obligations in this Agreement.


 


12.4        Severability
of Provisions.  Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.


 


12.5        Correction
of Loan Documents.  Bank may correct patent errors and fill in
any blanks in this Agreement and the other Loan Documents consistent with the
agreement of the parties.


 


12.6        Amendments
in Writing; Integration.  All amendments to this
Agreement must be in writing signed by both Bank and Borrower.  This Agreement and the Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements.  All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.


 


12.7        Counterparts. 
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.


 


12.8        Borrower Liability.  As detailed in Section 1, each
Borrower has appointed EnerNOC as Agent for each Borrower for all purposes
hereunder, including with respect to requesting Credit Extensions
hereunder.  Each Borrower hereunder shall be obligated to repay all Credit
Extensions made hereunder, regardless
of which Borrower actually receives said Credit Extension, as if each Borrower hereunder directly
received all Credit Extensions.  Each Borrower waives any
suretyship defenses available to it under the Code or any other applicable
law.  Each Borrower waives any right to
require Bank to: (i) proceed against any Borrower or any other person; (ii) proceed
against or exhaust any security; or (iii) pursue any other remedy.  Bank may exercise or not exercise any right
or remedy it has against any Borrower or any security it holds (including the
right to foreclose by judicial or non-judicial sale) without affecting any
Borrower’s liability.  Notwithstanding
any other provision of this Agreement or other related document, until the
Obligations (other than inchoate indemnification obligations) have been paid in
full and this Agreement has been terminated, each Borrower irrevocably waives
all rights that it may have at law or in equity (including, without limitation,
any law subrogating Borrower to the rights of Bank under this Agreement) to
seek contribution, indemnification or any other form of reimbursement from any
other Borrower, or any other Person now or hereafter primarily or secondarily
liable for any of the Obligations, for any payment made by Borrower with
respect to the Obligations in connection with this Agreement or otherwise and
all rights that it might have to benefit from, or to participate in, any
security for the Obligations as a result of any payment made by Borrower with
respect to the Obligations in connection with this Agreement or otherwise.  Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall
be null and void.  If any payment is made
to a Borrower in contravention of this Section, such Borrower shall hold such
payment in trust for Bank and such payment shall be promptly delivered to Bank
for application to the Obligations, whether matured or unmatured.


 


12.9        Survival. 
All covenants, representations and warranties made in this Agreement
continue in full force until this Agreement has terminated pursuant to its
terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have 


 


21





















 


been
satisfied.  The obligation of Borrower in
Section 12.2 to indemnify Bank shall survive until the statute of
limitations with respect to such claim or cause of action shall have run.


 


12.10      Confidentiality. 
In handling any financial statements of Borrower or other confidential
information, Bank shall exercise the same degree of care that it exercises for
its own proprietary information, but disclosure of information may be made: (a) to
Bank’s Subsidiaries or Affiliates; (b) to prospective transferees or
purchasers of any interest in the Credit Extensions (provided, however, Bank
shall use commercially reasonable efforts to obtain such prospective transferee’s
or purchaser’s agreement to the terms of this provision); (c) as required
by law, regulation, subpoena, or other order; (d) to Bank’s regulators or
as otherwise required in connection with Bank’s examination or audit; (e) as
Bank considers appropriate in exercising remedies under the Loan Documents; and
(f) to third-party service providers of Bank so long as such service
providers have executed a confidentiality agreement with Bank with terms no
less restrictive than those contained herein. 
Confidential information does not include information that either: (i) is
in the public domain or in Bank’s possession when disclosed to Bank, or becomes
part of the public domain after disclosure to Bank; or (ii) is disclosed
to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.


 


Bank
may use confidential information for any purpose, including, without
limitation, for the development of client databases, reporting purposes, and
market analysis, so long as Bank does not disclose Borrower’s identity or the
identity of any person associated with Borrower unless otherwise expressly
permitted by this Agreement.  The
provisions of the immediately preceding sentence shall survive the termination
of this Agreement.


 


12.11      Right
of Set Off.   Borrower hereby grants to Bank, a lien,
security interest and right of set off as security for all Obligations to Bank,
whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Bank
(including a Bank subsidiary) or in transit to any of them.  At any time after the occurrence and during
the continuance of an Event of Default, without demand or notice, Bank may set
off the same or any part thereof and apply the same to any Obligation of
Borrower then due regardless of the adequacy of any other collateral securing
the Obligations.  ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.


 


13           DEFINITIONS


 


13.1        Definitions. 
As used in this Agreement, the following terms have the following
meanings:


 


“Account” is any
“account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable
and other sums owing to Borrower.


 


“Account Debtor”
is any “account debtor” as defined in the Code with such additions to such term
as may hereafter be made.


 


“Additional Costs”
is defined in Section 3.7(b).


 


“Advance” or “Advances” means an advance (or advances) under the Revolving
Line.


 


“Affiliate” of
any Person is a Person that owns or controls directly or indirectly the Person,
any Person that controls or is controlled by or is under common control with
the Person, and each of that Person’s senior executive officers, directors, partners
and, for any Person that is a limited liability company, that Person’s managers
and members.


 


“Agent” is
defined in Section 1.2(a).


 


“Agreement” is
defined in the preamble hereof.


 


“Availability Amount”
is (a) the Revolving Line minus (b) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) plus an
amount equal to the Letter of Credit Reserve, minus (c) the FX Reduction
Amount, minus (d) any amounts used for Cash Management Services, minus (e) the
outstanding principal balance of any Advances, and minus (f) the
outstanding principal balance of the Term Advances.


 


22

















 


“Bank” is
defined in the preamble hereof.


 


“Bank Expenses”
are all reasonable documented audit fees and expenses, and reasonable
documented costs, and expenses (including reasonable documented attorneys’ fees
and expenses) for preparing, amending, negotiating, administering, defending
and enforcing the Loan Documents (including, without limitation, those incurred
in connection with appeals or Insolvency Proceedings) or otherwise incurred
with respect to Borrower.


 


“Borrower” is
defined in the preamble hereof.


 


“Borrower’s Books”
are all Borrower’s books and records including ledgers, federal and state tax
returns, records regarding Borrower’s assets or liabilities, the Collateral,
business operations or financial condition, and all computer programs or
storage or any equipment containing such information.


 


“Borrowing Resolutions”
are, with respect to any Person, those resolutions adopted by such Person’s
Board of Directors and delivered by such Person to Bank approving the Loan
Documents to which such Person is a party and the transactions contemplated
thereby, together with a certificate executed by its secretary on behalf of
such Person certifying that (a) such Person has the authority to execute,
deliver, and perform its obligations under each of the Loan Documents to which
it is a party, (b) that attached as Exhibit A to such certificate is
a true, correct, and complete copy of the resolutions then in full force and
effect authorizing and ratifying the execution, delivery, and performance by
such Person of the Loan Documents to which it is a party, (c) the name(s) of
the Person(s) authorized to execute the Loan Documents on behalf of such
Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Bank may conclusively rely on such certificate unless and
until such Person shall have delivered to Bank a further certificate canceling
or amending such prior certificate.


 


“Business Day”
is any day other than a Saturday, Sunday or other day on which banking
institutions in the State of California are authorized or required by law or
other governmental action to close, except that if any determination of a “Business
Day” shall relate to a LIBOR Credit Extension, the term “Business Day” shall
also mean a day on which dealings are carried on in the London interbank
market.


 


“Cash Equivalents” are 
(a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof having
maturities of not more than one (1) year from the date of acquisition; (b) commercial
paper maturing no more than one (1) year after its creation and having the
highest rating from either Standard & Poor’s Ratings Group or Moody’s
Investors Service, Inc.; (c) Bank’s certificates of deposit issued
maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.


 


“Cash Management
Services”  is defined in
Section 2.1.4.


 


“Change in Control”
means any event, transaction, or occurrence as a result of which (a) any “person”
(as such term is defined in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as an amended (the “Exchange Act”)),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of Borrower and other than Foundation Capital and/or Draper
Fisher, is or becomes a beneficial owner (within the meaning Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
Borrower, representing fifty percent (50.0%) or more of the combined voting
power of Borrower’s then outstanding securities; or (b) during any period
of twelve consecutive calendar months, individuals who at the beginning of such
period constituted the Board of Directors of Borrower (together with any new directors
whose election by the Board of Directors of Borrower was approved by a vote of
at least two-thirds of the directors then still in office who either were
directions at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office.


 


“Claims” are
defined in Section 12.2.


 


“Code” is the
Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the Commonwealth of Massachusetts; provided, that, to the extent that
the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the Commonwealth of Massachusetts,
the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes on
the provisions thereof relating to such attachment, perfection, priority, or
remedies and for purposes of definitions relating to such provisions.


 


23

















 


“Collateral” is
any and all properties, rights and assets of Borrower described on Exhibit A.


 


“Collateral Account”
is any Deposit Account, Securities Account, or Commodity Account.


 


“Commitment Termination Date” is the earlier of August 5, 2009 and the written
termination of this Agreement by Borrower.


 


 “Commodity Account” is any “commodity account” as defined in
the Code with such additions to such term as may hereafter be made.


 


“Communication”
is defined in Section 10.


 


“Compliance Certificate”
is that certain certificate in the form attached hereto as Exhibit B.


 


“Contingent Obligation”
is, for any Person, any direct or indirect liability, contingent or not, of
that Person for (a) any indebtedness, lease, dividend, letter of credit or
other obligation of another such as an obligation directly or indirectly guaranteed,
endorsed, co-made, discounted or sold with recourse by that Person, or for
which that Person is directly or indirectly liable; (b) any obligations
for undrawn letters of credit for the account of that Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement,
interest rate cap or collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; but “Contingent Obligation” does not
include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the
stated or determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may not
exceed the maximum of the obligations under any guarantee or other support
arrangement.


 


“Continuation Date”
means any date on which Borrower elects to continue a LIBOR Credit Extension
into another Interest Period.


 


“Control Agreement”
is any control agreement entered into among the depository institution at which
Borrower maintains a Deposit Account or the securities intermediary or
commodity intermediary at which Borrower maintains a Securities Account or a
Commodity Account, Borrower, and Bank pursuant to which Bank obtains control
(within the meaning of the Code) over such Deposit Account, Securities Account,
or Commodity Account.


 


“Conversion Date”
means any date on which Borrower elects to convert a Prime Rate Credit
Extension to a LIBOR Credit Extension or a LIBOR Credit Extension to a Prime
Rate Credit Extension.


 


“Credit Extension”
is any Advance, Term Advance, Letter of Credit, FX Forward Contract, amount
utilized for Cash Management Services, or any other extension of credit by Bank
for Borrower’s benefit.


 


 “Default Rate” is defined in Section 2.4(c).


 


 “Deposit Account” is any “deposit account” as defined in the
Code with such additions to such term as may hereafter be made.


 


“Designated Deposit Account”
is Borrower’s deposit account, account number
                          ,
maintained with Bank.


 


“Dollars,”  “dollars” and “$” each mean
lawful money of the United States.


 


“Effective Amount”
means with respect to any Credit Extension on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowing and
prepayments or repayments thereof occurring on such date.


 


“Effective Date”
is defined in the preamble of this Agreement.


 


“EnerNOC” is
defined in the preamble of this Agreement.


 


“EnerNOC Securities”
is defined in the preamble of this Agreement.


 


24

















 


“Equipment” is
all “equipment” as defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures,
goods, vehicles (including motor vehicles and trailers), and any interest in
any of the foregoing.


 


“ERISA” is the
Employee Retirement Income Security Act of 1974, and its regulations.


 


“Event of Default”
is defined in Section 8.


 


“Foreign Currency”
means lawful money of a country other than the United States.”


 


“Funding Date”
is any date on which a Credit Extension is made to or on account of Borrower
which shall be a Business Day.


 


“FX Business Day”
is any day when (a) Bank’s Foreign Exchange Department is conducting its
normal business and (b) the Foreign Currency being purchased or sold by
Borrower is available to Bank from the entity from which Bank shall buy or sell
such Foreign Currency.


 


“FX Forward Contract”  is defined in Section 2.1.3.


 


“FX Reduction Amount”
is defined in Section 2.1.3.


 


“FX Reserve”  is defined in Section 2.1.3.


 


“GAAP” is
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of determination.


 


“General Intangibles”
is all “general intangibles” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation, all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work, whether published or unpublished, any patents, trademarks, service marks
and, to the extent permitted under applicable law, any applications therefor,
whether registered or not, any trade secret rights, including any rights to
unpatented inventions, payment intangibles, royalties, contract rights,
goodwill, franchise agreements, purchase orders, customer lists, route lists,
telephone numbers, domain names, claims, income and other tax refunds, security
and other deposits, options to purchase or sell real or personal property,
rights in all litigation presently or hereafter pending (whether in contract,
tort or otherwise), insurance policies (including without limitation key man,
property damage, and business interruption insurance), payments of insurance
and rights to payment of any kind.


 


“Governmental
Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.


 


“Governmental
Authority” is any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative functions of or pertaining to
government, any securities exchange and any self-regulatory organization.


 


“Guarantor”  is any present or future guarantor of the Obligations.


 


“Indebtedness”
is (a) indebtedness for borrowed money or the deferred price of property
or services, such as reimbursement and other obligations for surety bonds and
letters of credit, (b) obligations evidenced by notes, bonds, debentures
or similar instruments, (c) capital lease obligations, and (d) Contingent
Obligations.


 


“Indemnified Person”
is defined in Section 12.2.


 


 “Insolvency Proceeding” is any proceeding by or against any
Person under the United States Bankruptcy Code, or any other bankruptcy or
insolvency law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.


 


25

















 


“Interest Expense”
means for any fiscal period, interest expense (whether cash or non-cash)
determined in accordance with GAAP for the relevant period ending on such date,
including, in any event, interest expense with respect to any Credit Extension
and other Indebtedness of Borrower, including, without limitation or
duplication, all commissions, discounts, or related amortization and other fees
and charges with respect to letters of credit and bankers’ acceptance financing
and the net costs associated with interest rate swap, cap, and similar
arrangements, and the interest portion of any deferred payment obligation
(including leases of all types).


 


“Interest Payment Date”
means, with respect to any LIBOR Credit Extension, the last day of each
Interest Period applicable to such LIBOR Credit Extension and, with respect to
Prime Rate Credit Extensions, the first (1st) calendar day of each
month (or, if the first (1st) day of the month does not fall on a
Business Day, then on the first Business Day following such date), and each
date a Prime Rate Credit Extension is converted into a LIBOR Credit Extension
to the extent of the amount converted to a LIBOR Credit Extension.


 


“Interest Period”
means, as to any LIBOR Credit Extension, the period commencing on the date of
such LIBOR Credit Extension, or on the conversion/continuation date on which the
LIBOR Credit Extension is converted into or continued as a LIBOR Credit
Extension, and ending on the date that is one (1), two (2),  or three (3) months thereafter, in each
case as Borrower may elect in the applicable Notice of Borrowing or Notice of Conversion/Continuation;
provided, however, that (a) no
Interest Period with respect to any LIBOR Credit Extension shall end later than
the Maturity Date, (b) the last day of an Interest Period shall be
determined in accordance with the practices of the LIBOR interbank market as
from time to time in effect, (c) if any Interest Period would otherwise
end on a day that is not a Business Day, that Interest Period shall be extended
to the following Business Day unless, in the case of a LIBOR Credit Extension,
the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the
preceding Business Day, (d) any Interest Period pertaining to a LIBOR
Credit Extension that begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last Business Day of
the calendar month at the end of such Interest Period, and (e) interest
shall accrue from and include the first Business Day of an Interest Period but
exclude the last Business Day of such Interest Period.


 


“Interest Rate
Determination Date” means each date for calculating the LIBOR for
purposes of determining the interest rate in respect of an Interest
Period.  The Interest Rate Determination
Date shall be the second Business Day prior to the first day of the related
Interest Period for a LIBOR Credit Extension.


 


“Inventory” is
all “inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without
limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.


 


“Investment” is
any beneficial ownership interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution to
any Person.


 


 “Letter of Credit” means a standby letter of credit issued by
Bank or another institution based upon an application, guarantee, indemnity or
similar agreement on the part of Bank as set forth in Section 2.1.2.


 


“Letter of Credit
Application” is defined in Section 2.1.2(a).


 


“Letter of Credit Reserve”
has the meaning set forth in Section 2.1.2(d).


 


“LIBOR” means,
for any Interest Rate Determination Date with respect to an Interest Period for
any Credit Extension to be made, continued as or converted into a LIBOR Credit
Extension, the rate of interest per annum determined by Bank to be the per
annum rate of interest at which deposits in United States Dollars are offered
to Bank in the London interbank market (rounded upward, if necessary, to the
nearest 1/100th of one percent (0.01%)) in which Bank customarily participates
at 11:00 a.m. (local time in such interbank market) two (2) Business
Days prior to the first day of such Interest Period for a period approximately
equal to such Interest Period and in an amount approximately equal to the
amount of such Credit Extension.


 


“LIBOR Credit
Extension” means a Credit Extension that bears interest based at the
LIBOR Rate plus the LIBOR Rate Margin.


 


26

















 


“LIBOR Rate” means, for each Interest Period in
respect of LIBOR Credit Extensions comprising part of the same Credit
Extensions, an interest rate per annum
(rounded upward to the nearest 1/16th of one percent (0.0625%)) equal to LIBOR
for such Interest Period divided by
one (1) minus the Reserve
Requirement for such Interest Period.


 


“LIBOR Rate Margin”
is (a) with respect to Credit Extensions made pursuant to Section 2.1.5,
two and three quarters of one percent (2.75%), and (b) with respect to
Credit Extensions made pursuant to Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4,
two and one-quarter of one percent (2.25%).


 


 “Lien” is a claim, mortgage, deed of trust,
levy, charge, pledge, security interest or other encumbrance of any kind,
whether voluntarily incurred or arising by operation of law or otherwise
against any property.


 


 “Loan Documents” are, collectively, this Agreement, the
Perfection Certificate, any subordination agreement, any note, or notes or
guaranties executed by Borrower or any Guarantor, and any other present or
future agreement between Borrower any Guarantor and/or for the benefit of Bank
in connection with this Agreement, all as amended, restated, or otherwise
modified.


 


“Material Adverse Change”
is (a) a material impairment in the perfection or priority of Bank’s Lien
in the Collateral or in the value of such Collateral; (b) a material
adverse change in the business, operations, or condition (financial or
otherwise) of Borrower; (c) a material impairment of the prospect of
repayment of any portion of the Obligations; or (d) Bank determines, based
upon information available to it and in its reasonable business judgment, that
there is a reasonable likelihood that Borrower shall fail to comply with one or
more of the financial covenants in Section 6 during the next succeeding
financial reporting period.


 


“Maturity Date”
is, as applicable, the Revolving Line Maturity Date or the Term Loan Maturity
Date.


 


“Notice of Borrowing”
means a notice given by Borrower to Bank in accordance with Section 3.2(a),
substantially in the form of Exhibit C, with appropriate
insertions.


 


“Notice of
Conversion/Continuation” means a notice given by Borrower to Bank in
accordance with Section 3.5, substantially in the form of Exhibit D,
with appropriate insertions.


 


“Obligations”
are Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, whether under this
Agreement or the Loan Documents, including, without limitation, all obligations
relating to letters of credit (including reimbursement obligations for drawn
and undrawn letters of credit), cash management services, and foreign exchange
contracts, if any, and including interest accruing after Insolvency Proceedings
begin, and the performance of Borrower’s duties under the Loan Documents.


 


“Operating Documents” are, for any Person, such Person’s
formation documents, as certified with the Secretary of State of such Person’s
state of formation on a date that is no earlier than thirty (30) days prior to
the Effective Date, and, (a) if such Person is a corporation, its bylaws
in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if
such Person is a partnership, its partnership agreement (or similar agreement),
each of the foregoing with all current amendments or modifications thereto.


 


 “Perfection Certificate” is defined in Section 5.1.


 


“Permitted Auction Rate
Securities” are the following securities owned by Borrower: (a) Cusip
00433TAC7; and (b) Cusip 709163EU9.


 


“Permitted Distributions”
means:


 


(a)           purchases of capital stock from
former employees, consultants and directors pursuant to repurchase agreements
or other similar agreements in an aggregate amount not to exceed One Hundred
Thousand Dollars ($100,000.00) in any fiscal year provided that at the time of
such purchase no Default or Event of Default has occurred and is continuing;


 


(b)           distributions or dividends consisting
solely of Borrower’s capital stock;


 


(c)           purchases for value of any rights
distributed in connection with any stockholder rights plan;


 


27
















 


(d)           purchases of capital stock or options
to acquire such capital stock with the proceeds received from a substantially
concurrent issuance of capital stock or convertible securities;


 


(e)           purchases of capital stock pledged as
collateral for loans to employees;


 


(f)            purchases of capital stock in
connection with the exercise of stock options or stock appreciation rights by
way of cashless exercise or in connection with the satisfaction of withholding
tax obligations;


 


(g)           purchases of fractional shares of capital
stock arising out of stock dividends, splits or combinations or business
combinations; and


 


(h)           the settlement or performance of such
Person’s obligations under any equity derivative transaction, option contract
or similar transaction or combination of transactions.


 


“Permitted Indebtedness”
is:


 


(a)           Borrower’s Indebtedness to Bank under
this Agreement and the other Loan Documents;


 


(b)           Indebtedness existing on the
Effective Date and shown on the Perfection Certificate;


 


(c)           Subordinated Debt;


 


(d)           unsecured Indebtedness to trade creditors incurred in the ordinary course of business;


 


(e)           Indebtedness
incurred as a result of endorsing negotiable instruments received in the
ordinary course of business;


 


(f)            Indebtedness in an aggregate
principal amount not to exceed Five Hundred Thousand Dollars ($500,000.00)
secured by Permitted Liens;


 


(g)           Indebtedness of Borrower to any
Subsidiary and Contingent Obligations of any Subsidiary with respect to
obligations of Borrower (provided that the primary obligations are not
prohibited hereby), and Indebtedness of any Subsidiary to Borrower in an
aggregate principal amount not to exceed Two Hundred Fifty Thousand Dollars
($250,000.00) or any other Subsidiary and Contingent Obligations of any
Subsidiary with respect to obligations of any other Subsidiary (provided that
the primary obligations are not prohibited hereby); and


 


(h)           extensions,
refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (g) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case
may be.


 


“Permitted Investments”
are:


 


(a)           Investments
shown on the Perfection Certificate and existing on the Effective Date;


 


(b)           Cash
Equivalents;


 


(c)           Investments
consisting of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of Borrower;


 


(d)           Investments
consisting of deposit accounts with Bank or in which Bank has a first priority
perfected security interest;


 


(e)           Investments
accepted in connection with Transfers permitted by Section 7.1;


 


(f)            (i) Investments
of a Subsidiary that is not a Borrower hereunder in or to other Subsidiaries or
Borrower, (ii) Investments of a Borrower in another Borrower, and (iii) Investments
by Borrower in Subsidiaries for the ordinary and necessary current operating
expenses of such Subsidiaries so long as the aggregate amount of such
Investments does not exceed Five Hundred Thousand Dollars ($500,000.00) per
fiscal year;


 


28

















 


(g)           Investments
consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower’s Board of Directors;


 


(h)           Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
ordinary course of business; and


 


(i)            Investments
consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary
course of business; provided that this paragraph (i) shall not apply to
Investments of Borrower in any Subsidiary.


 


“Permitted Liens”
are:


 


(a)           Liens existing on the Effective Date
and shown on the Perfection Certificate or arising under this Agreement and the
other Loan Documents;


 


(b)           Liens for taxes, fees, assessments or
other government charges or levies, either not delinquent or being contested in
good faith and for which Borrower maintains adequate reserves on Borrower’s
Books, provided that no notice of any such Lien has been filed or
recorded under the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations adopted thereunder;


 


(c)           purchase money Liens (i) on
Equipment acquired or held by Borrower incurred for financing the acquisition
of the Equipment securing no more than Five Hundred Thousand Dollars
($500,000.00) in the aggregate amount outstanding, or (ii) existing on
Equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the Equipment;


 


(d)           Liens of carriers, warehousemen,
suppliers, or other Persons that are possessory in nature arising in the
ordinary course of business, securing liabilities in the aggregate amount not
to exceed One Hundred Thousand Dollars ($100,000.00) and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;


 


(e)           Liens to secure payment of workers’
compensation, employment insurance, old-age pensions, social security and other
like obligations incurred in the ordinary course of business (other than Liens
imposed by ERISA);


 


(f)            Liens incurred in the extension,
renewal or refinancing of the indebtedness secured by Liens described in (a) through
(c), but any extension, renewal or replacement Lien must be limited to
the property encumbered by the existing Lien and the principal amount of the
indebtedness may not increase;


 


(g)           leases or subleases of real property
granted in the ordinary course of business, and leases, subleases,
non-exclusive licenses or sublicenses of property (other than real property or
intellectual property) granted in the ordinary course of Borrower’s business, if
the leases, subleases, non-exclusive licenses and sublicenses do not prohibit
granting Bank a security interest;


 


(h)           non-exclusive license of intellectual
property granted to third parties in the ordinary course of business;


 


(i)            Liens arising from attachments or
judgments, orders, or decrees in circumstances not constituting an Event of
Default under Sections 8.4 and 8.7; and


 


(j)            Liens in favor of other financial
institutions arising in connection with Borrower’s deposit and/or securities
accounts held at such institutions, provided that Bank has a first priority
perfected security interest in the amounts held in such deposit and/or
securities accounts.


 


“Person” is any
individual, sole proprietorship, partnership, limited liability company, joint
venture, company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.


 


“Prime Rate” is
Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
rate.


 


29

















 


“Prime Rate Credit Extension” means a Credit Extension that bears interest based at
the Prime Rate plus the Prime Rate Margin.


 


“Prime Rate Margin”
is (a) with respect to Credit Extensions made pursuant to Section 2.1.5,
one half of one percent (0.50%), and (b) with respect to Credit Extensions
made pursuant to Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4, zero percent
(0.00%).


 


 “Quick Assets” is, on any date, Borrower’s
unrestricted cash plus net accounts receivable plus unbilled amounts on
Borrower’s balance sheet that are contractually owing to Borrower from PJM and
that are payable within the next twelve (12) months in an amount not to exceed
Twenty Million Dollars ($20,000,000.00) plus marketable securities that are
immediately available for sale (but specifically excluding any auction rate
securities other than an amount equal to fifty percent (50.0%) of the value of
the Permitted Auction Rate Securities up to One Million Four Hundred Fifty
Thousand Dollars ($1,450,000.00)), determined according to GAAP.


 


“Quick Ratio” is
a ratio of (a) Quick Assets, to (b) all of Borrower’s liabilities and
Obligations to Bank (whether pursuant to this Agreement or otherwise).


 


“Registered Organization”
is any “registered organization” as defined in the Code with such additions to
such term as may hereafter be made.


 


“Regulatory Change”
means, with respect to Bank, any change on or after the date of this Agreement
in United States federal, state, or foreign laws or regulations, including
Regulation D, or the adoption or making on or after such date of any
interpretations, directives, or requests applying to a class of lenders
including Bank, of or under any United States federal or state, or any foreign
laws or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.


 


 “Reserve Requirement” means, for any Interest Period, the
average maximum rate at which reserves (including any marginal, supplemental,
or emergency reserves) are required to be maintained during such Interest
Period under Regulation D against “Eurocurrency liabilities” (as such term is
used in Regulation D) by member banks of the Federal Reserve System.  Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by Bank by reason of any Regulatory Change against (a) any
category of liabilities which includes deposits by reference to which the LIBOR
Rate is to be determined as provided in the definition of LIBOR or (b) any
category of extensions of credit or other assets which include Credit
Extensions.


 


 “Responsible Officer” is any of the Chief Executive Officer,
President, Chief Financial Officer and Controller of Borrower.


 


“Revolving Line”
is an Advance or Advances in an aggregate amount of up to Thirty-Five Million
Dollars ($35,000,000.00) outstanding at any time.


 


“Revolving Line Maturity Date” is August 5, 2010.


 


“Securities Account”
is any “securities account” as defined in the Code with such additions to such
term as may hereafter be made.


 


“Subordinated Debt”
is (a) Indebtedness incurred by Borrower subordinated to Borrower’s
Indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form reasonably acceptable to Bank and approved by Bank in writing,
and (b) to the extent the terms of subordination do not change adversely
to Bank, refinancings, refundings, renewals, amendments or extensions of any of
the foregoing.


 


 “Subsidiary” is, with respect to any Person, any Person of
which more than fifty percent (50.0%) of the voting stock or other equity
interests (in the case of Persons other than corporations) is owned or
controlled, directly or indirectly, by such Person or one or more Affiliates of
such Person.


 


“Tangible Net Worth”
is, on any date, the total assets of Borrower minus (a) any amounts
attributable to (i) goodwill, (ii) intangible items including
unamortized debt discount and expense, patents, trade and service marks and
names, copyrights and research and development expenses except prepaid
expenses, (iii) notes, accounts receivable and other obligations owing to
Borrower from its officers or other Affiliates, and (iv) reserves not
already deducted from assets, minus (b) Total Liabilities, plus
(c) Subordinated Debt.


 


30

















 


“Term Advance”
or “Term Advances” is defined in Section 2.1.5(a).


 


“Term Loan Amount” is
an amount equal to Ten Million Dollars ($10,000,000.00).


 


“Term Loan Maturity Date” is, for each Term
Advance, the first day of the month that is the thirty-fifth (35th) month after
the month in which Borrower makes its first payment of principal with respect
to such Term Advance pursuant to Section 2.1.5(b).


 


“Total Liabilities”
is on any day, obligations that should, under GAAP, be classified as
liabilities on Borrower’s consolidated balance sheet, including all
Indebtedness, and current portion of Subordinated Debt permitted by Bank to be
paid by Borrower, but excluding all other Subordinated Debt.


 


“Transfer” is
defined in Section 7.1.


 


“United States
Dollars” is the lawful currency of the United States of America.


 


“Unused Revolving
Line Facility Fee” is defined in Section 2.5(d).


 


[signature page to
follow]


 


31

















 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the Effective Date.


 


 


BORROWER:


 


ENERNOC, INC.


 


	
  By: 

  	
  /s/ Neal C. Isaacson

  	
   

  
	
  Name: 

  	
  Neal C. Isaacson

  	
   

  
	
  Title: 

  	
   Chief
  Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ENERNOC SECURITIES
  CORPORATION

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Neal C. Isaacson

  	
   

  
	
  Name: 

  	
  Neal C. Isaacson

  	
   

  
	
  Title: 

  	
   Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BANK:

  	
   

  
	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ David Rodriguez

  	
   

  
	
  Name: 

  	
  David Rodriguez

  	
   

  
	
  Title: 

  	
   Senior Vice
  President

  	
   

  
							



 


 


[Signature page to Loan
and Security Agreement]


 

















 


EXHIBIT A


 


The Collateral consists
of all of Borrower’s right, title and interest in and to the following personal
property:


 


All goods, Accounts (including health-care
receivables), Equipment, Inventory, contract rights or rights to payment of
money, leases, license agreements, franchise agreements, General Intangibles
(except as provided below), commercial tort claims, documents, instruments
(including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, certificates of deposit, fixtures, letters
of credit rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting
obligations, and financial assets, whether now owned or hereafter acquired,
wherever located; and


 


all Borrower’s Books relating to the foregoing, and
any and all claims, rights and interests in any of the above and all
substitutions for, additions, attachments, accessories, accessions and
improvements to and replacements, products, proceeds and insurance proceeds of
any or all of the foregoing.


 


Notwithstanding the
foregoing, the Collateral does not include any of the following, whether now
owned or hereafter acquired any
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published
or unpublished, any patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues,
extensions, and continuations-in-part of the same, trademarks, service marks
and, to the extent permitted under applicable law, any applications therefor,
whether registered or not, and the goodwill of the business of Borrower
connected with and symbolized thereby, know-how, operating manuals, trade
secret rights, rights to unpatented inventions, and any claims for damage by
way of any past, present, or future infringement of any of the foregoing;
provided, however, the Collateral shall include all Accounts, license and
royalty fees and other revenues, proceeds, or income arising out of or relating
to any of the foregoing.


 


Pursuant to the terms of
a certain negative pledge arrangement with Bank, Borrower has agreed not to
encumber any of its copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work, whether published or unpublished, any patents, patent applications and
like protections, including improvements, divisions, continuations, renewals,
reissues, extensions, and continuations-in-part of the same, trademarks,
service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, and the goodwill of the
business of Borrower connected with and symbolized thereby, know-how, operating
manuals, trade secret rights, rights to unpatented inventions, and any claims
for damage by way of any past, present, or future infringement of any of the
foregoing, without Bank’s prior written consent.


 


1
















 


EXHIBIT B


 


COMPLIANCE
CERTIFICATE


 


	
  TO:

  	
  SILICON VALLEY BANK

  	
  Date:

  	
   

  
	
  FROM:

  	
  ENERNOC, INC. and ENERNOC SECURITIES CORPORATION

  	
   

  



 


The undersigned authorized officer of ENERNOC, INC.
and ENERNOC SECURITIES CORPORATION (individually and collectively, jointly and
severally, “Borrower”) certifies that under the terms and conditions of the
Loan and Security Agreement between Borrower and Bank (as amended, the “Agreement”),
(1) Borrower is in complete compliance for the period ending
                              
with all required covenants except as noted below, (2) there are no Events
of Default, (3) all representations and warranties in the Agreement are
true and correct in all material respects on this date except as noted below;
provided, however, that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, (4) Borrower,
and each of its Subsidiaries, has timely filed all required tax returns and
reports, and Borrower has timely paid all foreign, federal, state and local
taxes, assessments, deposits and contributions owed by Borrower except as
otherwise permitted pursuant to the terms of Section 5.8 of the Agreement,
and (5) no Liens have been levied or claims made against Borrower or any
of its Subsidiaries relating to unpaid employee payroll or benefits of which
Borrower has not previously provided written notification to Bank.  Attached are the required documents
supporting the certification.  The undersigned
certifies that these are prepared in accordance with GAAP consistently applied
from one period to the next except as explained in an accompanying letter or
footnotes.  The undersigned acknowledges
that no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is
delivered.  Capitalized terms used but
not otherwise defined herein shall have the meanings given them in the
Agreement.


 


Please indicate compliance status by circling
Yes/No under “Complies” column.


 


	
  Reporting
  Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly Financial
  Statements on Form 10-Q

  	
   

  	
  Quarterly within 45
  days

  	
   

  	
  Yes  No

  
	
  Monthly Compliance
  Certificate

  	
   

  	
  Monthly within 45 days

  	
   

  	
  Yes  No

  
	
  Annual
  financial statements (CPA Audited) on 10-K together with an unqualified
  audited opinion

  	
   

  	
  FYE within 90 days

  	
   

  	
  Yes  No

  
	
  8-K, 10-Q and 10-K
  filings

  	
   

  	
  Within 5 days after SEC
  filing

  	
   

  	
  Yes  No

  
	
  A/R and A/P agings and
  statement of account balances

  	
   

  	
  As requested by Bank

  	
   

  	
  Yes  No

  
	
  Board projections

  	
   

  	
  60 days after FYE

  	
   

  	
  Yes  No

  



 


Contracts
entered into during month by Borrower restricting grant of security interest to
Bank pursuant to Section  5.2 of the Agreement:


 


	
  Financial
  Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quick Ratio (monthly)

  	
   

  	
  1.85 : 1.0

  	
   

  	
  : 1.0

  	
   

  	
  Yes  No

  
	
  Tangible Net Worth
  (quarterly)

  	
   

  	
  $

  	
  *

  	
   

  	
  $

  	
   

  	
   

  	
  Yes  No

  
									



 






*As set forth in Section 6.7(b) of
the Loan and Security Agreement.


 


1

















 


The
following financial covenant analyses and information set forth in Schedule 1
attached hereto are true and accurate as of the date of this Certificate.


 


The
following are the exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptions
to note.”)


 


 


 


 


	
  ENERNOC, INC.

  	
   

  	
  BANK USE ONLY

  
	
  ENERNOC SECURITIES CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
  By:

  	
   

  	
   

  	
                                       
  AUTHORIZED SIGNER

  
	
  Name:

  	
   

  	
   

  	
  Date:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
                                       
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
  Compliance Status:                Yes      
  No

  
										



 


2

















 


Schedule 1 to Compliance Certificate


Financial Covenants of Borrower


 


	
  Dated:

  	
   

  	
   

  



 


In the event of a
conflict between this Schedule and the Loan Agreement, the terms of the Loan
Agreement shall control.


 


I.              Quick Ratio (Section 6.7(a))


 


	
  Required:

  	
   

  	
  1.85 : 1.00

  
	
   

  	
   

  	
   

  
	
  Actual:

  	
   

  	
          :
  1.00

  



 


	
  A.

  	
   

  	
  Aggregate value of the
  unrestricted cash of Borrower

  	
   

  	
  $        

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Aggregate value of the
  net accounts receivable of Borrower plus unbilled amounts on Borrower’s
  balance sheet that are contractually owing to Borrower from PJM and that are
  payable within the next twelve (12) months in an amount not to exceed Twenty
  Million Dollars ($20,000,000.00)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C. 

  	
   

  	
  Marketable securities
  that are immediately available for sale (but specifically excluding any
  auction rate securities other than an amount equal to fifty percent (50.0%)
  of the value of the Permitted Auction Rate Securities up to One Million Four
  Hundred Fifty Thousand Dollars ($1,450,000.00))

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Quick Assets (the sum
  of lines A, B and C)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Aggregate value of
  obligations and liabilities of Borrower to Bank

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Quick Ratio (line D
  divided by line E)

  	
   

  	
   

  



 


Is line F equal to or
greater than 1.85 : 1.00?


 


	
   

  	
                o    No,
  not in compliance

  	
   

  	
         o    Yes,
  in compliance

  



 


II.            TANGIBLE NET WORTH
(Section 6.7(b))


 


	
  Required:

  	
  $                 (see
  Section 6.7(b))

  
	
   

  	
   

  
	
  Actual:

  	
  $                  

  



 


Is Tangible Net Worth at
least
$                                    
(see Section 6.7(b))?


 


	
   

  	
                o    No,
  not in compliance

  	
   

  	
         o    Yes,
  in compliance

  



 


3

















 


EXHIBIT C


 


FORM OF NOTICE OF BORROWING


 


ENERNOC, INC.


and


ENERNOC SECURITIES CORPORATION


 


	
   

  	
  Date:

  	
   

  



 


	
  TO:

  	
  SILICON VALLEY BANK

  
	
   

  	
  3003 Tasman Drive

  
	
   

  	
  Santa Clara, CA 95054

  
	
   

  	
  Attention: Corporate
  Services Department

  
	
   

  	
   

  
	
  RE:

  	
  Loan and Security Agreement dated as of
                  
        , 2008 (as amended, modified,
  supplemented or restated from time to time, the “Loan
  Agreement”), by and among (a) EnerNOC, Inc. and EnerNOC
  Securities Corporation (individually and collectively, jointly and severally,
  the “Borrower”) and (b) Silicon Valley Bank (the “Bank”)

  



 


Ladies and
Gentlemen:


 


The undersigned refers
to the Loan Agreement, the terms defined therein and used herein as so defined,
and hereby gives you notice irrevocably, pursuant to Section 3.4(a) of
the Loan Agreement, of the borrowing of a Credit Extension.


 


1.             The
Funding Date, which shall be a Business Day, of the requested borrowing is
                              .


 


2.             The
aggregate amount of the requested borrowing is
$                          .


 


3.             The
requested Credit Extension shall consist of
$                      
of Prime Rate Credit Extensions and
$             of
LIBOR Credit Extensions.


 


4.             The
duration of the Interest Period for the LIBOR Credit Extensions included in the
requested Credit Extension shall be
                    
months.


 


The undersigned hereby
certifies that the following statements are true on the date hereof, and will
be true on the date of the proposed Credit Extension before and after giving
effect thereto, and to the application of the proceeds therefrom, as
applicable:


 


(a)           all representations and warranties of Borrower contained
in the Loan Agreement are true, accurate and complete in all material respects
as of the date hereof; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are qualified
or modified by materiality in the text thereof; and provided, further that
those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date;


 


(b)           no Event of Default has occurred and is continuing, or
would result from such proposed Credit Extension; and


 


(c)           the
requested Credit Extension will not cause the aggregate principal amount of the
outstanding Credit Extensions to exceed, as of the designated Funding Date, the
Revolving Line.


 


4

















 


	
  BORROWER

  	
  ENERNOC, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ENERNOC SECURITIES CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


 


For internal Bank use only


 


	
  LIBOR
  Pricing Date

  	
   

  	
  LIBOR

  	
   

  	
  LIBOR Variance

  	
   

  	
  Maturity Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

  	
   

  



 


5

















 


EXHIBIT D


 


FORM OF NOTICE OF CONVERSION/CONTINUATION


 


ENERNOC, INC.


and


ENERNOC SECURITIES CORPORATION


 


	
   

  	
  Date:

  	
   

  



 


	
  TO:

  	
  SILICON VALLEY BANK

  
	
   

  	
  3003 Tasman Drive

  
	
   

  	
  Santa Clara, CA 95054

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  RE:

  	
  Loan and Security
  Agreement dated as of
                  
        , 2008 (as amended, modified,
  supplemented or restated from time to time, the “Loan
  Agreement”), by and among (a) EnerNOC, Inc. and EnerNOC
  Securities Corporation (individually and collectively, jointly and severally,
  the “Borrower”) and (b) Silicon Valley Bank (the “Bank”)

  



 


Ladies and
Gentlemen:


 


The undersigned
refers to the Loan Agreement, the terms defined therein being used herein as
therein defined, and hereby gives you notice irrevocably, pursuant to Section 3.5
of the Loan Agreement, of the [conversion] [continuation] of the Credit
Extensions specified herein, that:


 


1.             The date of the [conversion] [continuation] is
                                           ,
20      .


 


2.             The aggregate amount of the proposed Credit Extensions
to be [converted] is $                   
or [continued] is $                                  .


 


3.             The Credit Extensions are to be [converted into]
[continued as] [LIBOR] [Prime Rate] Credit Extensions.


 


4.             The duration of the
Interest Period for the LIBOR Credit Extensions included in the [conversion]
[continuation] shall be
           months.


 


The undersigned, on behalf of Borrower, hereby certifies that
the following statements are true on the date hereof, and will be true on the
date of the proposed [conversion] [continuation], before and after giving
effect thereto and to the application of the proceeds therefrom:


 


(a)           all representations and warranties of Borrower stated in
the Loan Agreement are true, accurate and complete in all material respects as
of the date hereof; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific
date shall be true, accurate and complete in all material respects as of such
date; and


 


(b)           no
Event of Default has occurred and is continuing, or would result from such
proposed [conversion] [continuation].


 


[Signature page follows.]


 


1

















 


	
  BORROWER

  	
  ENERNOC, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ENERNOC SECURITIES CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


 


For internal Bank use only


 


	
  LIBOR
  Pricing Date

  	
   

  	
  LIBOR

  	
   

  	
  LIBOR Variance

  	
   

  	
  Maturity Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

  	
   

  



 


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